The informal credit suppliers give credit both in cash and grain, and for any purpose. They recover credit either in cash or grain or labor. Such terms and conditions suit most to the credit users whose demand for subsistence credit is acute and who have extremely limited and even stagnant opportunities to develop their economic activities in agriculture and forests. Under such conditions, the stereotyped functions of formal credit suppliers prove thoroughly inadequate. They can rarely meet the implicit policy objective of substituting an informal credit supply source. The credit source substitution process is a decision making process of the borrowers. And it is influenced by the incremental gains perceived by them. Incremental gains are defined as opportunity gains expected to be realized as a result of substitution of one source of credit for the other. Conversely, incremental losses are defined as opportunity gains expected to be lost in this process. Under the existing terms and conditions of the two types of credit sources, the incremental gains and losses are basically affected by (a) availability of an access to grain markets, (b) availability of employment, (c) interest rates, (d) grain prices, and (e) wage rates. If interest rates alone were relevant, a family would perceive an incremental benefit of Rs. 13 on every Rs. 100 borrowed from a cooperative instead of from a trade-cum-landowner, assuming interest rates of 12% and 25% respectively. However, the other factors particularly (a) and (b), have such a dominating influence that this gain would be wiped out and the family would tend not to substitute cooperative credit for moneylender credit.