<p>A rich literature shows that in developed countries, cash windfalls increase consumption and are often used to pay off debt. Does inequality influence how cash transfers affect consumption and borrowing, in developing countries? In this paper, we study an unconditional cash transfer program for agricultural landowners in India in a quasi-natural experiment set up. In aggregate, cash transfers led to an increase in consumption alongside increase in borrowings on the extensive margin. Farmers with large land holdings increased only bank borrowings, whereas small and marginal farmers increased both consumption and borrowing from banks – with heterogeneous effects across quartiles. There are no effects on landless agricultural laborers. These effects appear after cash disbursement and not when the announcement was made. Our results suggest that as landholding size increases, households tend to respond more through formal borrowing than consumption.</p>