Govt Expands Credit Push for Agriculture, Targets Small Farmers and Allied Sectors

At the core of the government’s approach is the annual Ground Level Credit (GLC) target for agriculture and allied sectors, which banks are mandated to achieve.

The Government of India has rolled out a series of policy measures to significantly expand institutional credit flow to the agriculture sector, with a strong focus on small and marginal farmers and underserved rural segments, the Rajya Sabha was informed on Tuesday.

Minister of State for Finance Pankaj Chaudhary outlined a multi-pronged strategy combining credit targets, policy incentives, concessional loans and institutional strengthening to boost rural financing and agricultural productivity.

Credit Targets and Priority Lending Framework Strengthened

At the core of the government’s approach is the annual Ground Level Credit (GLC) target for agriculture and allied sectors, which banks are mandated to achieve.

These targets are:

• Set region-wise and institution-wise (including commercial banks, RRBs and cooperative banks)

• Divided into crop loans and term loans

• Expanded since 2021–22 to include dedicated targets for allied sectors such as dairy, fisheries and animal husbandry

In parallel, the Reserve Bank of India’s Priority Sector Lending (PSL) norms require banks to:

• Allocate at least 18% of total credit to agriculture

• Ensure 10% specifically reaches small and marginal farmers (SMFs)

An incentive-disincentive framework has also been introduced to encourage balanced credit distribution across districts, addressing regional disparities.

Kisan Credit Card and Subsidised Loans Driving Access

The Kisan Credit Card (KCC) scheme remains a cornerstone of agricultural financing, offering farmers timely and affordable credit for:

• Seeds, fertilisers and pesticides

• Working capital needs

• Allied activities such as dairying, fisheries and animal husbandry (expanded since 2019)

To further reduce borrowing costs, the Modified Interest Subvention Scheme (MISS) provides:

• Loans at 7% interest rate

• An additional 3% incentive for prompt repayment, effectively lowering rates to 4%

Collateral-Free Loan Limit Increased to ₹2 Lakh

In a major relief for farmers, the RBI has increased the limit for collateral-free agricultural loans from ₹1.6 lakh to ₹2 lakh, effective January 2025.

This move is expected to:

• Improve access to credit for over 86% of farmers, who are small and marginal

• Reduce dependency on informal lending

• Lower financial barriers to agricultural investment

New Scheme Targets Low-Credit Districts

As part of the Union Budget 2025–26, the government launched the PM Dhan Dhaanya Krishi Yojana (PM-DDKY).

A key objective of the scheme is to:

• Ensure adequate availability of both short-term and long-term credit

• Focus on districts with low agricultural credit penetration

Officials say this targeted approach will help bridge structural gaps in rural financing.

NABARD Plays Central Role in Credit Expansion

The National Bank for Agriculture and Rural Development (NABARD) continues to anchor rural credit planning and refinancing.

Key interventions include:

Credit Planning and Target Setting

• Preparation of district-level Potential Linked Credit Plans (PLPs)

• Aggregation at state level to guide national credit targets

Refinance Support to Banks

• Short-term refinance for crop loans and allied activities via State Cooperative Banks, RRBs and Small Finance Banks

• Long-term refinance for infrastructure and investment through banks, NBFCs and rural institutions

Sector-Specific Financing Initiatives

NABARD also provides concessional refinance for:

• Micro food processing

• Animal husbandry infrastructure

• Solar rooftop projects

• Agriculture Infrastructure Fund (AIF)

• Primary Agricultural Credit Societies (PACs) as Multi-Service Centres

• World’s Largest Grain Storage Plan (WLGSP)

• National Rural Livelihoods Mission (NRLM)

Infrastructure and Institutional Strengthening

To improve credit absorption in rural areas, the government is:

• Investing in infrastructure through the Rural Infrastructure Development Fund (RIDF)

• Strengthening Regional Rural Banks (RRBs) and cooperative banks through technology upgrades and reforms

These efforts aim to enhance last-mile credit delivery in rural and backward regions.

Focus on Inclusive Growth and Rural Prosperity

The government’s expanded credit strategy is designed to:

• Boost agricultural productivity and income

• Support allied sectors and diversification

• Reduce regional inequalities in credit access

• Promote financial inclusion and rural development

With agriculture employing a significant portion of India’s workforce, officials say improving access to institutional credit is critical for sustainable growth, poverty reduction and resilience in the rural economy.