The study looked into the demand and supply of institutional credit to agriculture in Jammu & Kashmir. It was observed that the agricultural credit has increased in absolute terms since 1980’s but its share in total credit has gone down for 12.4 to 7.8% of total credit disbursed in the economy between 1980 and 2010. The results revealed wide disparity across regions with respect to the disbursement of direct credit to agriculture. Moreover, there is a huge gap in the financial requirement and supply of institutional credit to agriculture in the state. The estimates of regression analysis indicated that real farm prices, gross irrigated area, coverage of rural banks, loanable cash balances of commercial banks, state gross domestic product and agriculture domestic product were significant positive determinants of direct credit supply to agricultural sector. On the other hand higher level of permanent income, rural literacy, technology level and value of farm assets have contributed in the improvement of demand for institutional credit. While temporary income and cooperative agricultural credit appeared negative indicating that it supplement farmers’ financial requirement and in turn resulted in declining demand for institutional credit. Based upon the findings, the study put forth few policy suggestions.