Author(s): Alpa Karmur, B Swaminathan, VD Tarpara and NJ Ardeshna

Abstract: This study investigates the determinants of loan default and repayment capacity among farmers in the Saurashtra region of Gujarat using discriminant function analysis. Based on a sample of 300 borrowers from three districts—Rajkot, Junagadh, and Bhavnagar—the research evaluates source-wise credit flow, borrowing behavior, and repayment performance using both primary and secondary data. Logistic regression was employed to analyze the choice of credit source, while discriminant function analysis identified key socio-economic variables distinguishing wilful and non-wilful defaulters. Results reveal that loan utilization patterns, capital formation, and cropping expenditure ratio play a significant role in predicting repayment behavior, more than mere demographic factors. The discriminant model effectively classified 93.5% of non-defaulters and 72.2% of defaulters correctly. Additionally, working capital ratio (? = 4.07) and return on equity (? = 10.20) emerged as strong predictors of repayment capacity. Among the constraints, information asymmetry and mandatory insurance were the most cited barriers to accessing credit. The findings suggest that institutional lenders should incorporate localized economic indicators—such as cropping cost ratios, landholding size, and capital formation—into risk assessment processes. Enhanced outreach, targeted training, and better awareness of loan products are recommended to reduce defaults and improve credit outcomes.

Pages: 31-38 | Views: 586 | Downloads: 6

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