Cash News
The government has set an agriculture credit disbursement target of Rs 27.5 lakh crore for the current fiscal, which is 11% higher compared to actual loans disbursement in FY24. The finance ministry is learnt to have also asked the lenders to try and align the credit approvals with the gross-value added (GVA) of the crops for the respective states, a move that is expected to address regional imbalances in availability of loans for farmers.
Banks already follow district-wise potential linked credit plans each year to boost the flow of institutional credit to priority sector activities such as crop loans and term loans for agricultural and allied enterprises.
The finance ministry has earmarked Rs 16 lakh crore for the short term crop loans and Rs 11.5 lakh crore to term loans to be disbursed by banks for 2024-25, sources said. Commercial banks will provide Rs 20.62 lakh crore or 75% of the total credit earmarked for farmers in the current fiscal, while thebalance will be provided by cooperative and regional rural banks.
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Out of total agri-credit flow, Rs 4.2 lakh crore has been earmarked for short term loans to the livestock sector – dairy, fisheries and poultry – in the current fiscal year.
Recently, Niti Aayog Member Ramesh Chand said that a criterion needs to be fixed for allocation of farm credit to state governments on the basis of their respective farm outputs to ensure that the subsidised short-term crop loans are not concentrated in a few states or diverted for non-agricultural purposes.
The commercial banks, cooperative banks and Regional Rural Banks have disbursed Rs 24.84 trillion in 2023-24 under term and crop loans, a rise of 15% compared to FY23 according to the provisional figure.
Last fiscal, credit disbursal to Tamil Nadu was highest at Rs 4.39 trillion (17.6% of disbursal in the country) followed by Andhra Pradesh accounting for Rs 2.96 trillion or 12% of the disbursal in 2023-24.
Over Rs 12.5 trillion (50.5%) was disbursed to five southern states — Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala –while the region had only 17% of the gross cropped area of the country.
To address regional disparities in the flow of priority sector credit at the district level, RBI has taken the initiative to rank districts based on per capita credit flow. The apex bank has stressed on building an incentive framework for districts with a comparatively lower flow of credit and a disincentive framework for districts with comparatively higher credit flow.
Officials said that Nabard is working with banks towards improving credit culture especially in eastern India by providing collateral in terms of social guarantee or a specialised fund and insurance products.
Under the modified interest subvention scheme (MISS), farmers holding Kisan credit cards (KCCs) are provided up to Rs 3 lakh loans at 7% interest per annum to meet their working capital requirement. The scheme provides additional interest subvention of 3% for prompt repayment of the loan, thereby reducing the effective rate of interest to 4%.
Currently, out of 73.6 million KCC holders, 23.7 million belong to agri-allied sectors. Under the MISS, in FY25 a budgetary allocation of Rs 22,600 crore has been made.