New Delhi, March 18: The Government of India has implemented a series of policy measures aimed at expanding institutional credit to the agriculture sector, with particular emphasis on underserved segments such as small and marginal farmers and allied activities including dairy, fisheries, and animal husbandry.
The initiatives are designed to improve access to affordable credit, strengthen rural financial institutions, and enhance agricultural productivity through increased financial inclusion in rural areas.
According to information shared in the Rajya Sabha by Pankaj Chaudhary, Minister of State in the Ministry of Finance, the government sets annual Ground Level Credit (GLC) targets for agriculture and allied sectors, which banks are required to meet during each financial year.
These credit targets are allocated region-wise and agency-wise across institutions such as Scheduled Commercial Banks, Regional Rural Banks, and rural cooperative banks. Since the financial year 2021–22, the government has also introduced dedicated credit targets for allied agricultural activities to ensure focused financial support for sectors like dairy farming, fisheries, and animal husbandry.
The credit expansion strategy is also supported by regulatory norms under Priority Sector Lending (PSL) issued by the Reserve Bank of India. Under these guidelines, commercial banks—including Regional Rural Banks, Small Finance Banks, Local Area Banks and primary urban cooperative banks—must allocate at least 18% of their Adjusted Net Bank Credit (ANBC) or credit equivalent of off-balance sheet exposures to agriculture.
Within this mandate, a sub-target of 10% has been earmarked specifically for Small and Marginal Farmers (SMFs), who account for a significant majority of India’s agricultural community. The PSL framework also includes incentive mechanisms to encourage higher credit flow to districts with lower lending levels while discouraging excessive concentration of credit in already well-served districts.
A key instrument supporting farmers’ access to credit is the Kisan Credit Card (KCC) scheme, which provides timely and affordable credit to farmers for purchasing agricultural inputs such as seeds, fertilizers and pesticides, as well as meeting working capital needs. Since 2019, the scheme has also been expanded to cover working capital requirements related to animal husbandry, dairying, and fisheries.
To further reduce borrowing costs for farmers, the government operates the Modified Interest Subvention Scheme (MISS), under which farmers can access short-term crop loans at a concessional interest rate of 7% through Kisan Credit Cards. Farmers who repay their loans on time are eligible for an additional 3% incentive, effectively reducing the interest rate to 4%.
In another move to improve credit access, the collateral-free loan limit for short-term agricultural loans has been raised from ₹1.60 lakh to ₹2 lakh per borrower, effective January 1, 2025. The increase is expected to particularly benefit small and marginal farmers, who constitute over 86% of India’s farming community, by enabling easier access to formal credit without the need for collateral.
The government has also been strengthening rural infrastructure and financial ecosystems through institutional support from the National Bank for Agriculture and Rural Development (NABARD). Funds allocated under the Rural Infrastructure Development Fund (RIDF) are used to support infrastructure projects in rural areas, which in turn enhance credit absorption capacity in agriculture and allied sectors.
As part of the Union Budget 2025–26, the government also announced the launch of the PM Dhan Dhaanya Krishi Yojana (PM-DDKY). One of the key objectives of the scheme is to improve the availability of both long-term and short-term agricultural credit in districts where credit disbursement to the sector remains low.
Efforts are also underway to strengthen rural financial institutions such as cooperative banks and Regional Rural Banks through technology upgrades and institutional reforms to improve their operational efficiency and outreach.
NABARD continues to play a central role in boosting credit flow to the agriculture sector. Under the RBI’s Lead Bank Scheme, NABARD prepares Potential Linked Credit Plans (PLPs) for each district every year to estimate the credit potential under priority sectors. These district-level plans are aggregated at the state level and used as the basis for setting annual credit targets for agriculture.
To support banks in meeting these targets, NABARD provides refinance assistance for both short-term and long-term agricultural lending. Short-term refinance is extended to institutions such as State Cooperative Banks, Regional Rural Banks, and Small Finance Banks for crop loans and other agricultural lending activities.
Long-term refinance support is also provided to rural financial institutions, scheduled commercial banks, small finance banks, and non-banking financial companies to strengthen lending for agriculture and allied sectors.
In addition, NABARD offers concessional refinance under various specialised schemes supporting sectors such as micro food processing, animal husbandry infrastructure development, solar rooftop installations, aspirational districts, and initiatives like the Agriculture Infrastructure Fund and the National Rural Livelihoods Mission.
The government believes these coordinated policy interventions will strengthen the rural credit ecosystem, improve farmers’ access to affordable finance, and support sustainable agricultural growth across the country.
