Credit plays a crucial role in economic life and is essential for the country's development. Without access to credit, a large section of people, especially the poor, would be kept out of the development process. Therefore, availability of credit to all on reasonable terms is a right of the people.

Credit is available from formal sources like banks and cooperative societies, and informal sources like moneylenders. Currently, richer households receive credit from formal sources while the poor have to depend on informal sources. The terms of credit vary substantially between formal and informal lenders. It is essential that the total formal sector credit increases so that dependence on expensive informal credit reduces.

When banks and cooperative societies lend more, it leads to higher incomes. People can then borrow cheaply for various needs like growing crops, doing business, setting up small-scale industries, or trade. Cheap and affordable credit is crucial for the country's development.

However, credit can have dual outcomes. In one situation, credit helps increase earnings and makes a person better off. In another situation, due to risks like crop failure, credit can push a person into a debt trap. Whether credit would be useful depends on the risks in the situation and whether there is some support in case of loss.

For development, it is important that the poor get a much greater share of formal loans from banks and cooperative societies. Both increasing formal sector credit and providing greater share to the poor are important steps for development.