Agriculture credit

Agriculture Credit in India 

Agricultuiral credit scenario: Agricultural credit is critical input to agriculture and helps in creating environment for the adoption of modern production technology and encouraging private investments on the farms.

Trends and patterns in agriculture credit

• During 2019-20, the institutional credit flow to the agriculture sector in India was to the tune of Rs.13.93 lakh crore against the target of Rs.13.50 lakh crore.

• NABARD All India Rural Financial Inclusion Survey conducted for 2015-16 also reported that institutional sources accounted for only 72 percent of the loans taken by an average farm household (HH), and the remaining 28 percent came from non-institutional sources .

Problems with agriculture credit

• Regional Disparities in Credit Dispensation: The share of Southern Region in the total agriculture credit flow has increased continuously from the year 2016-17 whereas the share of other regions except Eastern and Northeast Regions has decreased from 2013-14 to 2019-20.
• Low coverage of Small and Marginal Farmers: Their share in loan disbursed by Commercial Banks is at a lower level of around 47.3 per cent during 2019-2020.
• Dependency on non-institutional credit- due to the complex and rigid process of the banking sector, lack of collateral.
• Diversion of loans to non-Agriculturalal purposes due to extra expenditure to other day to day expenses.
• Red Tapism: Credit institutions are still adopting cumbersome rules and formalities for advancing loan to farmers which ultimately force the farmers to depend more on costly non-institutional sources of credit.

Key govt initiatives 

• Kisan Credit Card Scheme: To provide adequate and timely credit support from the banking systems to the farmers for their cultivation and other needs like- Post harvest expense; Produce marketing loan.
• Modified Interest Subvention Scheme (MISS): Under this scheme, farmers are given KCC loan at interest rate of 7% per annum for loans unto Rs 3 Lakhs.
• Scheme for financing of Joint Liability Groups of Tenant Farmers: It was started by NABARD to give 100 percent refinance support to banks. 
• Priority Sector Lending: 18% of loans of commercial banks to agricultural sector.

Way forward 

• Widen reach of agriculture credit- by digitization and updating land records, strong and federal institution like GST for undermining process and implementation of reforms.
• Address regional disparity - by giving more focus and allocation to lagged states.
• Use of FPO and other initiatives to increase risk bearing ability of farmers.
• Credit for small and marginal farmers:  It recommended that the lending target for small and marginal farmers should be revised from the existing 8% to 10% with a roadmap of two years.
• Policies regarding loan waiving -    the central and state governments should undertake a holistic review of agricultural policies and input subsidies in order to improve the overall viability and sustainability of agriculture.