The Finance Ministry of India has set a bold agricultural credit target of ₹27.5 lakh crore for the fiscal year 2025, marking an 11% increase over the previous year. This initiative aims to invigorate the agricultural sector by addressing regional disparities and enhancing farmers' access to loans. While the objective is to stimulate rural economies and boost agricultural productivity, several critical areas require careful evaluation to ensure the successful implementation of these measures.
The main goal of the government is to increase the availability of loans for farmers and address regional disparities in credit distribution. The Finance Ministry's target of ₹27.5 lakh crore supports both short-term and long-term agricultural needs, encompassing crop loans, livestock, dairy, fisheries, and other related sectors.
Of the total credit target, ₹16 lakh crore is designated for short-term loans, while ₹11.5 lakh crore is allocated for long-term agricultural and allied enterprise needs. Commercial banks are responsible for providing 75% of the total credit, with the remainder supplied by cooperative and regional rural banks.
The system faces significant challenges, including unequal credit distribution across states. A notable concentration of disbursals is in a few southern states—Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Kerala—accounting for more than 50% of agricultural loans. Addressing these regional disparities is crucial for equitable credit access.
To combat these inequalities, the RBI is ranking districts based on per capita credit flow, urging banks to prioritize regions with lower credit availability. This involves creating a comparative framework to guide banks toward underfunded areas, ensuring a balanced distribution of agricultural loans.
The government collaborates with banks to enhance institutional credit to priority sectors, including agriculture, by linking district-wise production and farm outputs to loan disbursals. NABARD is also partnering with financial institutions to direct funds effectively toward targeted agricultural activities.
The Modified Interest Subvention Scheme (MISS) provides farmers with Kisan Credit Cards (KCC) loans up to ₹3 lakh at a 7% interest rate per annum, with an extra 3% interest subvention for timely repayments. This reduces the effective interest rate to 4%, offering significant financial relief to farmers.
Among the 73.6 million KCC holders in India, 23.7 million are involved in the dairy and allied sectors. The government has allocated ₹22,600 crore under MISS for FY25, aiming to support marginal and small farmers in meeting their working capital needs.
Enhancing credit access in underserved regions, ensuring transparent and need-based loan disbursement, and integrating digital solutions to monitor credit flow are essential. Improved collaboration among banks, cooperatives, and government agencies can further streamline credit availability to support the diverse needs of the agricultural sector.
"Effective policy implementation lies not in setting targets but in ensuring that every farmer, irrespective of location, has access to the resources needed to cultivate and sustain a prosperous future."
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