The present work has a limited objective in that it seeks to build some broad idea about the structure and the actual nature of operation of rural credit markets in West Bengal in recent years. Specifically, we address ourselves to the following questions: 1. What has been the nature of participation of various categories of rural households in rural credit markets? 2. How the formal and informal loans have been distributed in rural areas? 3. Who the informal lenders are and who borrows from whom in the market for rural credit? 4. What have been the terms and conditions of the credit contracts in rural areas? 5. What determines the rural households access to formal loan? 6. What have been the actual costs associated with the formal loans? 7. Is there any gap between the requirement for formal credit and it's ultimate availability in rural West Bengal?

The need for undertaking a study of this kind needs no great elaboration. As is well known, West Bengal agriculture in recent years has experienced tremendous boost in the rate of growth of production. It is also maintained by large section of the scholars that this has become possible through vigorous implementation of various agrarian reform programmes as also establishment of a system of decentralised governance through the restoration of the panchayati raj system. The agrarian reform programmes undertaken so far helped to remove various kinds of imperfections that previously prevailed in the market for land. These imperfections are usually associated with exploitative land relations. Some recent studies have clearly brought out this result. As things stand now, if West Bengal agriculture has to sustain its current growth of production and progress further, imperfections in other agrarian markets such as those for credit, product and labour also need to be corrected.

The main findings emerging from our study of nature and workings of rural credit markets in West Bengal are summarised below.

Participation in rural credit markets: In the villages surveyed by us in West Bengal, the rate of participation of the rural households in credit markets (formal and/or informal) has been extremely high. More than 90 % of all households have turned out to be the borrowing households. This is reflective of their acute need for credit. However, the rural households do not confine themselves to the formal credit sources alone. Thus, the informal credit operates simultaneously and indeed more strongly alongside the formal credit in rural West Bengal.

Distribution of formal credit: Not only that the quantum of formal credit has been inadequate but also its distribution being far from equal in West Bengal villages. Our data revealed that the agricultural labourers have been almost fully debarred from the benefits of formal credit. In order to satisfy their credit needs, the agricultural labourers are forced to depend on the informal credit sources. Among various groups of farmers, the percentage of households borrowing from the formal agencies has been the highest for the category of small farmers (those operating land between 2.50 and 4.99 acres). This does not necessarily mean that the formal credit agencies in rural West Bengal have been pursuing a small farmer oriented credit policy.

Who are the informal lenders? The informal lenders do not constitute a homogeneous category in our study areas. Different groups of informal lenders are found to operate in rural areas with different motives. Apart from the village's moneylenders, other prominent informal lenders in West Bengal villages are found to be the 'inputs sellers' and 'friends and relatives'.

Who borrows from whom? In the market for informal credit, each lender may have his own preference for a borrower. It may then be possible to establish some relationship between the lender-borrower types. We observed that among various types of borrowers, the categories of marginal and small farmers have been preferred most by the village moneylenders. The traders have also revealed their inclination for these categories. On the other hand, while the class of 'inputs sellers' displayed a tendency of serving all categories of farmers, yet their preference for better-off farmers obtaining loans from their 'friends and relatives' has also been greater in our study areas. However, the big cultivators have mostly preferred the categories of agricultural labourers and marginal farmers while advancing loans.

Lender type and purpose of loan: Within the informal credit market, some relationship may also exist between the type of lender and the purpose of loan. Our data show that, among the informal lenders, the 'inputs sellers' and the traders supply the production loans only. On the other hand, most important suppliers of consumption loans have been the big cultivators, village moneylenders and 'friends and relatives'. This implies that the informal credit market itself gets further segmented depending upon the purpose for which the loans are obtained by the borrowers.

Delivery time and transaction cost of formal loan: Several scholars have highlighted the difficulties into which the rural borrowers are put into while obtaining loans from the formal credit agencies. Such difficulties may arise from the delays in disbursement of loan, large number of visits to the bank offices and so on. It has been argued that owing to these difficulties, rural borrowers have to incur heavy transaction costs in respect to the formal loans. Our investigation in West Bengal villages revealed that, on average, a rural borrowed had to wait for about one and half months since the date of submission of the application, before getting the loan in hand. This is contrary to the case for an informal loan that is available almost immediately on demand. We also observed that, for the poorer households, the delay in disbursement of loans goes up and the frequency of making visit to the bank offices is greater for them. However, as regards the transaction costs of formal loans, we found an encouraging result. It is that the element of transaction costs has been very low (less than 1%) in our study areas. This is possibly because a large number of institutional loans in our survey villages are drawn from the cooperative societies which are locally established and also have members in managing committees representing all categories of households. Consequently, the rural households obtained formal loans at he expense of very low transaction costs. It is however, to be noted that between different categories of borrowers, the transaction costs are relatively lower for the better-off households.