The Government of India has implemented several initiatives to increase institutional credit flow to the agriculture and allied sectors, particularly targeting underserved segments such as small and marginal farmers. These measures aim to improve access to affordable finance, strengthen rural financial institutions, and promote agricultural growth.
Key Measures to Increase Agricultural Credit
| Initiative/Policy | Objective/Significance | Key Features/Provisions |
|---|---|---|
| Ground Level Credit (GLC) Targets | Ensures adequate and structured credit flow to agriculture and allied activities. | · Government sets annual GLC targets for agriculture and allied sectors. |
| · Targets fixed every financial year and banks are required to meet them. | ||
| · Categorised by region-wise and agency-wise allocation: Scheduled Commercial Banks, Regional Rural Banks, Rural Cooperative Banks. | ||
| · Loan categories include crop loans and term loans. | ||
| · Since 2021–22, separate credit targets for allied sectors such as dairy, fisheries, and animal husbandry. | ||
| Priority Sector Lending (PSL) Norms | Ensures priority lending to agriculture and small farmers. | · Banks must allocate at least 18% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE) (whichever is higher) to agriculture. |
| · Sub-target: 10% of ANBC for Small and Marginal Farmers (SMFs). | ||
| · Applicable to Commercial Banks, Regional Rural Banks, Small Finance Banks, Local Area Banks, and Primary Urban Cooperative Banks. | ||
| Incentive and Disincentive Framework | Promotes balanced regional distribution of agricultural credit. | · Incentives provided for districts with low credit flow. |
| · Disincentives applied to districts with excessive credit concentration. | ||
| Kisan Credit Card (KCC) Scheme | Ensures easy access to short-term agricultural credit. | · Provides timely and affordable credit to farmers. |
| · Loans used for seeds, fertilisers, pesticides, crop production, and working capital. | ||
| · Since 2019, extended to animal husbandry, dairy, and fisheries. | ||
| Modified Interest Subvention Scheme (MISS) | Reduces cost of credit for farmers and encourages timely repayment. | · Farmers receive short-term crop loans through KCC at 7% interest. |
| · 3% interest incentive for prompt repayment. | ||
| · Effective interest rate becomes 4% for timely-paying farmers. | ||
| Increase in Collateral-Free Loan Limit | Benefits small and marginal farmers, who constitute over 86% of agricultural households. | · RBI increased limit for collateral-free short-term agricultural loans. |
| · Revised from ₹1.60 lakh to ₹2.00 lakh per borrower. | ||
| · Effective from 1 January 2025. | ||
| Rural Infrastructure Development Fund (RIDF) | Supports rural infrastructure development and enhances credit absorption capacity in rural areas. | · Financial assistance provided by NABARD. |
| PM Dhan Dhaanya Krishi Yojana (PM-DDKY) | Ensures adequate availability of short-term and long-term agricultural credit in districts with low credit disbursement. | · Announced in Union Budget 2025–26. |
| Strengthening Rural Financial Institutions | Improves credit delivery in rural and backward areas. | Focus on strengthening Regional Rural Banks (RRBs) and Rural Cooperative Banks through: |
| · Technology upgradation | ||
| · Institutional reforms | ||
| · Capacity strengthening | ||
| Potential Linked Credit Plan (PLP) | Helps plan district-level credit flow and support agricultural financing. | · Prepared by NABARD under the Lead Bank Scheme for each district. |
| · Estimates credit potential under priority sectors. | ||
| · Aggregated at state level to help set Ground Level Credit targets. | ||
| · NABARD also provides financial support to banks, NBFCs, and MFIs during cropping and harvesting seasons. |