Disbursal of farm loans has exceeded 90 per cent of the Budget estimate in the first nine months of the current fiscal, data from the Finance Ministry showed. Given this trend, the Interim Budget may see a hike of at least 10 per cent in the estimates for the next fiscal i.e., 2024-25.
“The agriculture credit target will be increased to ₹20 lakh crore, with the focus on animal husbandry, dairy and fisheries,” Finance Minister Nirmala Sitharaman said while announcing the Union Budget for Fiscal Year 2023-24 on February 1 last year. Today, the Ministry said as on December 31, 2023, little over ₹18 lakh crore, which is 90 per cent of the target, had been disbursed.
“Further, credit disbursed to the Animal Husbandry and Fisheries sector during FY 2023-24 at ₹1,91,412 crore, was 65 per cent of the target of ₹2.93 lakh crore,” the Ministry said, while talking about delivery on Budget promises. The disbursements include over ₹77,000 crore as working capital, and over ₹1.13 lakh crore as term loan.
Farm credit is given for both the short-term as well as medium- and long-term. According to the Financial Services Department in the Finance Ministry, agricultural credit had surged nearly three times from ₹7.3 lakh crore in in FY 2013-14 to ₹21.55 lakh crore in FY 2022-23. The Kisan Credit Card (KCC) scheme has played a pivotal role in providing timely and hassle-free credit to farmers, with over 7.36 crore operative KCC accounts at the end of 2023.
RBI mandates a priority sector lending target for banks, with 18 per cent allocated specifically for agriculture, and a 10 per cent sub-target for Small and Marginal Farmers (SMFs) for the FY 2023-24. The KCC Scheme ensures easy credit access for several farmer categories, including owner cultivators, tenant farmers and sharecroppers. Extension of KCC to animal husbandry farmers and fisheries aids their working capital requirements.
Concessional interest rates were offered to farmers for short-term crop and allied activity loans of up to ₹3 lakh through KCC during 2022-23 and 2023-24. This subvention benefits lending institutions and encourages timely repayment. The applicable lending rate to farmers and the rate of interest subvention for the financial years 2022-23 and 2023-24 is 7 per cent and 1.5 per cent per annum respectively.
An additional 3 per cent prompt repayment incentive (PRI) is also given for prompt and timely repayment of loans; thus, reducing the effective rate of interest to 4 per cent per annum, subject to a maximum period of one year from the date of disbursement. To enhance coverage of small and marginal farmers in the formal credit system, RBI is to raise the limit for collateral-free agriculture loans to ₹1.6 lakh from ₹1 lakh.
Also, banks streamlined lending by eliminating ‘no dues’ certificates for small loans up to ₹50,000 and accepting alternative documentation or affidavits for loans to landless labourers, sharecroppers, tenant farmers, and oral lessees. Also, NABARD created a useful way to lend money through ‘Joint Liability Groups’ (JLGs), who help tenant/landless farmers and non-farm workers get loans without offering collateral (like assets). This helps build trust between banks and JLG members. By March 31, 2023, a total of 257.9 lakh JLGs had been formed and linked to credit.