Government Unveils Measures to Boost Agricultural Credit Flow
The Indian government has announced a series of initiatives aimed at enhancing credit flow to the agricultural sector, particularly targeting underserved segments. These measures, outlined during a statement in the Rajya Sabha by Minister of State for Finance, Shri Pankaj Chaudhary, are designed to ensure that farmers have better access to financial resources necessary for cultivation and allied activities.
Targeted Credit Support for Agriculture
Each year, the government sets ground-level credit (GLC) targets for agriculture and related sectors that banks must strive to meet. These targets are categorized by region and type of lending, including both crop and term loans. A new addition since the financial year 2021-22 is the dedicated GLC targets for allied activities such as dairy, fisheries, and animal husbandry, which receive focused credit support.
Priority Sector Lending Guidelines
Under the Reserve Bank of India’s (RBI) Priority Sector Lending (PSL) guidelines, various banks—including Commercial Banks, Regional Rural Banks, and Cooperative Banks—are required to allocate at least 18% of their Adjusted Net Bank Credit (ANBC) to agriculture. Out of that, a sub-target of 10% is specifically aimed at supporting small and marginal farmers, who constitute over 86% of the agricultural sector.
Innovative Financial Products for Farmers
The Kisan Credit Card (KCC) is a cornerstone of the government’s initiative, providing farmers with timely and affordable credit for purchasing essential agricultural supplies. The KCC scheme, which has expanded since 2019 to include loans for animal husbandry and fisheries, is supported by the Modified Interest Subvention Scheme (MISS). This scheme offers loans at a concessional rate of 7%, with an additional 3% incentive for timely repayment, reducing the interest rate to just 4% for prompt payers.
Increased Loan Limits and Rural Development Funding
From January 1, 2025, the limit for collateral-free short-term agricultural loans will increase from Rs. 1.60 lakh to Rs. 2.00 lakh, making it easier for farmers to access necessary funds without needing to provide collateral. Additionally, the government is investing in rural infrastructure through the National Bank for Agriculture and Rural Development (NABARD), establishing funding to enhance credit absorption capacity in rural areas.
New Initiatives and Future Plans
The recently announced PM Dhan Dhaanya Krishi Yojana (PM-DDKY) aims to facilitate accessible long-term and short-term credit in districts that experience lower agricultural credit disbursement. Moreover, the government is actively strengthening rural financial institutions to ensure they are well-equipped to serve the needs of farmers in rural and backward areas.
NABARD plays a significant role in bolstering credit flow by preparing potential-linked credit plans for each district, allowing for a tailored approach that meets the unique needs of various agricultural regions. Through its refinancing options, NABARD supports banks in providing credit for both short and long-term agricultural needs.
These concerted efforts by the government aim to empower farmers by ensuring they have the financial tools necessary to thrive in an increasingly competitive agricultural landscape.
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