In spite of various measures to rejuvenate farm credit, the flow of credit to agriculture sector remained inadequate quantitatively and qualitatively. The study is based on a random sample of 600 farm households covering 11 districts in Punjab, comprising 107 marginal, 150 small, 53 semi-mediums, 87 medium and 103 large farmers and pertains to the year 2005-06. The total debt per sample farm household from both institutional and non-institutional sources has been found to be Rs 178934 in the year 2005-06. The institutional sources have contributed about 62 per cent to the total debt and non-institutional 38 per cent. Although the institutional credit has increased rapidly in recent years in Punjab, it still lacks behind the productive needs of the farmers in Punjab. A farmer on an average has to incur Rs 4016 for obtaining a loan from commercial banks, which amounts to 5 per cent of the total loan obtained by him. In the case of cooperatives, the transaction cost has been worked out to be 1.2 per cent of the loan and the cooperatives are located right in the villages. About 59 per cent farmers have reported the procedure to get loans from the institutional agencies to be complicated and time-consuming. On the contrary, availing non-institutional loan has been found easy and is the reason of preference given by 51 per cent farmers to it. Policy implications include issuing of a simple but comprehensive record book to farmers containing information relating to his land record and institutional transactions; computerization of land records by the state government; simplification of loan application form; and maintenance of proper records of loan applications and making disbursement of loan mandatory.