The present study attempts to examine the purpose of borrowing credit and the impact of borrowed credit on farmers' income and employment. The study was based on primary data involving personal interview of 150 randomly selected farmers (92 from marginal and 58 small size group) of two blocks (three villages from each block) in U.P. state. The data pertain to the crop year 1987-88. The result showed that the highest amount of credit was used towards buying manures and fertilizers followed by meeting irrigation charges and buying seeds. Functional analysis showed that total human labour, irrigation expenditure, operational holding, expenditure on seeds and expenditure on manures and fertilizer accounted for greater contribution to gross crop income. It emerged that credit advance to weaker sections should give emphasis on irrigation and seeds besides manures and fertilizer.