How Bankers and Small Households Adjust to Risk in Dryland Agriculture: A Case Study of Two Blocks in Karnataka, India

In India, the credit needs of dryland farmers, especially small and marginal farmers, are served largely by non-institutional sources. The formal bank ing system follows a risk-averse strategy towards lending to this segment, and does not appear to attach any significance to the generation of substantial intangible benefits to households through financial intermedia tion. After analysing the risk perceptions of households and banks in the Harihar and Mulkamuru blocks in Karnataka, the authors of this paper point to the need to develop an integrated approach to risk management while extending loans to dryland agriculture.