The research was carried out in the Bengaluru suburbs to examine the transaction costs of obtaining agricultural loans from official and informal sources, as well as the factors that influence the borrowers' transaction costs at the rural-urban interface. The information was gathered from 50 randomly chosen farmers from rural, peri-urban, and urban transacts. In all three gradients, the transaction cost of obtaining credit was higher in formal sources than in informal ones, according to the findings. In all three gradients, the overall transaction cost experienced by farmers was greatest in commercial banks, followed by Regional Rural Banks (RRBs), and Cooperative banks. Farmers' total transaction costs were highest in commercial banks (Rs. 5395.26), followed by cooperative banks (Rs. 3112.33), and RRBs (Rs. 1811.20) in the rural gradient, and lowest in informal credit sources (Rs. 1811.20). (Rs. 1140.27). The most significant expense in transaction costs was rent seeking, followed by document costs and the opportunity cost of time spent in all gradients. Multiple regression study found that the borrower's transaction cost was highly influenced by education, number of visits, total land holding, and amount borrowed. The study revealed that transaction costs in formal sources were high, and the government and institutions such as the Registration and Revenue authorities must pay special attention to this in order to restrict officials' rent-seeking conduct, which contributes to greater transaction costs. Collateral security regulations are preventing marginal and small farmers from accessing financing from formal sources, thus they must be revised, particularly for small and marginal farmers.
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