Explain the classification of agricultural credit on the basis of purpose.

Agricultural credit is an important prerequisite for agricultural growth.

On the basis of purpose there are two types of agricultural credit which is as follows: 

• Productive loan 
• Unproductive loan.

(i) Productive loans: Productive loans are those which are related to agricultural equipment. Productive loans help to increase farmers’ income in the future.

(ii) Unproductive loans: Unproductive loans are used for personal consumption. e.g. loans are taken for religious and social celebrations, birth and death ceremonies, expenditure on marriages, etc. 

Unproductive loans increase the debt burden of the farmers.