In Indian economy, agriculture sector plays a vital role and majority of the people depend on agriculture. In developing countries like India, 70% of the people are living in rural areas. Rural credit is very important for the development of rural economy and alleviation of poverty by providing credit facility to the poor and weaker section of the society. It is also helpful to meet their needs improving their standard of life and greater access to financial activities. There are many agencies providing rural credit. In India, there are delivery structures such as Commercial Banks, Regional Rural Banks (RRBs), Co-operative Banks and District Rural Credit Development Agency (DRDA) etc. These Institutions are having more than 1, 53,000 outlets which have been serving rural people. One for every outlet is serving 4,100 populations to deliver credit for poverty alleviation. The main objective of this study is to identify the reasons for financial exclusion in rural areas and to estimate the factors influencing informal borrowings of rural households. At present, the main challenges before rural credit institutions are poverty alleviation, flow of rural credit and building up the strength of co-operatives and regional rural banks.