ABSTRACT
Credit-insurance interlinked contracts can facilitate the development of both the credit and insurance markets by relaxing both liquidity and risk constraints in financial transactions. It is expected that interlinked contracts would address the problems of poor contract enforcement mechanisms, information asymmetries and high transaction costs. Against this backdrop, this chapter attempts to formulate a conceptual framework on the rationale of credit-insurance mix in managing risk in Indian agriculture. In addition, this chapter examines the outreach of insurance coverage in crop loans across Indian states in the light of interlinked transactions involving credit and insurance markets. Special emphasis is given to the critical evaluation of the National Agricultural Insurance Scheme vis-à-vis Pradhan Mantri Fasal Bima Yojana. Empirical evidences clearly bring out the fact that an effective implementation of credit-insurance mix policy can help both the markets to grow by mutually reinforcing each other.
