<p>The paper examines the status of indebtedness across social categories and investigates why Dalits on average pay higher interest rate on their loans compared to non-Dalits, even when borrowing under the same scheme. About one-third of households were in indebtedness by the end of June 2018, 90% of which became indebted during 2013–2018. The extent of indebtedness during this period was higher among SCs and OBCs. SCs and STs on average paid higher interest rates than OBCs and ‘Others’ regardless of lending institutions. They also faced higher interest rates even on loans taken under the schemes specifically designed to provide easy credit to marginalized community at supposedly lower interest rates. Using the Oaxaca–Blinder &amp; Fairlie decomposition techniques, the paper reveals that around 40% of the gap in accessing credit from formal sources between SCs and forward castes or ‘Others’ is unexplained and can be attributed to discrimination. Similarly, 40–70% of the difference in interest rates between the groups are unexplained, further suggesting discrimination. Due to such biases, Dalits are 11% less likely to obtain credit, and cost of credit for them is on average 2.4% higher compared to the “Others” category.</p>