Institutional Credit to Agriculture Reaches All-Time High in FY24

Institutional Credit to Agriculture Reaches All-Time High in FY24

Sub: Eco

Sec: External Sector

• Record High Credit:
  • Institutional credit to agriculture in 2023-24 reached an all-time high of ₹25.10 lakh crore, highlighting the importance of financing in promoting agricultural growth, as noted by RBI Deputy Governor Swaminathan J.
• Demographic Challenge:
  • Indian agriculture faces a demographic challenge, with the average age of farmers now at 50.1 years.
  • This highlights the need to attract younger generations to the sector to ensure its sustainability.

Sources:

• 72% of the credit requirement of agricultural households was met through institutional sources and 28% from non-institutional sources such as relatives and moneylenders.
• As per RBI directions, Domestic Scheduled Commercial Banks are required to lend 18% of the Adjusted Net Bank Credit (ANBC) or Credit Equivalent to Off-Balance Sheet Exposure (CEOBE), whichever is higher, towards agriculture. A sub-target of 8% is also prescribed for lending to small and marginal farmers (SF/MF) including landless agricultural labourers, tenant farmers, oral lessees and share croppers. Similarly, in the case of Regional Rural Banks 18% of their total outstanding advances is required to be towards agriculture and a sub-target of 8% has been set for lending to small and marginal farmers. With a view to ensure availability of agriculture credit at a reduced interest rate of 7% p.a. to the farmers, the Government of India in the Department of Agriculture, Cooperation and Farmers’ Welfare implements an interest subvention scheme for short term crop loans up to Rs. 3.00 lakh. The scheme provides interest subvention of 2% per annum to Banks on use of their own resources

• Kisan Credit Cards (KCC):
  • There are 7.4 crore active Kisan Credit Cards, which have become essential tools for providing timely and flexible credit for short-term agricultural needs.
• Regional Disparities:
  • Addressing regional disparities in access to credit remains a critical issue.
  • Ensuring all farmers, regardless of location, have access to adequate financing is crucial to tackling challenges related to sustainability and resilience in agriculture.
• Innovative Financial Solutions:
  • Traditional lending practices have limitations, and there is a need for innovative financial solutions that are flexible and tailored to the specific needs of farmers, as emphasized by the Deputy Governor during his keynote at the International Research Conference hosted by the College of Agricultural Banking (CAB), Pune.

Kisan Credit Card (KCC)

It is a scheme introduced in 1998 by the Government of India and NABARD to provide short-term credit to farmers for crop production and other agricultural expenses.

It offers them a flexible, simplified loan structure to purchase inputs like seeds, fertilizers, and equipment. Farmers can also withdraw funds as needed within a limit based on their landholding and crop value. KCC holders enjoy benefits such as lower interest rates, crop insurance, and risk mitigation.