The correct option is (a).
Explanation
Rural indebtedness among small and marginal farmers is a significant factor contributing to poverty and agrarian distress. This issue is structurally linked to the lack of financial inclusion and the heavy reliance on non-institutional credit markets.
Statement-wise Analysis:
- Statement 1 is Correct: Small farmers often lack the necessary collateral (such as clear land titles) and documentation required to access formal credit from banks. Consequently, they are compelled to borrow from informal sources like moneylenders, traders, and landlords to meet cultivation costs and emergency consumption needs.
- Statement 2 is Incorrect: The rate of interest charged by informal moneylenders is typically exorbitant and significantly higher than the regulated rates offered by commercial banks. Banks often provide agricultural loans at lower interest rates, sometimes supported by government interest subvention schemes.
- Statement 3 is Incorrect: Small farmers usually possess small landholdings and practice subsistence farming. Their production is often just sufficient for family consumption, leaving little to no marketable surplus. The absence of surplus income restricts their ability to generate the cash flow necessary for loan repayment.
Key Takeaway:
The distress of small farmers is primarily driven by the Debt Trap, a cycle created by high-interest informal loans and low agricultural surplus, which makes repayment impossible and forces further borrowing.