Govt Has Boosted Affordable Farm Credit Through Policy Measures, Says Mos Finance

(MENAFN- KNN India) New Delhi, Mar 18 (KNN) The government has strengthened the institutional credit framework for agriculture and allied sectors through a series of policy measures aimed at improving access to timely and affordable finance, Minister of State for Finance Pankaj Chaudhary said in a written reply in the Rajya Sabha.

Key interventions include enhanced collateral-free loan limits, interest subvention benefits and expanded coverage under the Kisan Credit Card (KCC) scheme, alongside targeted efforts to increase credit flow to underserved segments such as small and marginal farmers and allied activities.

Under the credit planning mechanism, annual Ground Level Credit (GLC) targets are set for agriculture and allied sectors, with region-wise and agency-wise allocations across Scheduled Commercial Banks, Regional Rural Banks and cooperative institutions.

"Dedicated targets for allied sectors such as dairy, fisheries and animal husbandry have also been introduced to ensure focused financial support," the MoS Finance said.

As per the Reserve Bank of India guidelines on Priority Sector Lending (PSL), banks are mandated to allocate at least 18 Per cent of their adjusted net bank credit to agriculture, including a sub-target of 10 Per cent for small and marginal farmers. The framework also includes incentive and disincentive mechanisms to address regional imbalances in credit flow.

The Kisan Credit Card scheme continues to play a central role by providing short-term credit for crop production and allied activities, with its scope expanded since 2019 to include working capital needs of animal husbandry, dairying and fisheries.

Additionally, under the Modified Interest Subvention Scheme, short-term loans are offered at a concessional rate of 7 Per cent, with an effective rate of 4 Per cent for prompt repayment.

To further ease access to credit, the collateral-free loan limit has been increased from Rs 1.60 lakh to Rs 2 lakh per borrower with effect from January 1, 2025, a move expected to particularly benefit small and marginal farmers. The government has also announced the PM Dhan Dhaanya Krishi Yojana in the Union Budget 2025–26 to improve credit availability in districts with low agricultural lending.

Institutional support is being reinforced through the National Bank for Agriculture and Rural Development, which provides refinance support to banks for both short-term and long-term agricultural lending.

NABARD also prepares district-level Potential Linked Credit Plans (PLP) to guide credit planning and facilitates concessional refinance across sectors such as micro food processing, infrastructure development and rural livelihoods.

In addition, allocations under the Rural Infrastructure Development Fund and efforts to strengthen rural financial institutions, including cooperative banks and regional rural banks, are aimed at enhancing credit absorption capacity in rural areas.

The measures are intended to expand formal credit access, reduce reliance on informal lending sources and support sustainable growth in the agriculture sector.

(KNN Bureau)

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