Agricultural Finance

4.1 Sources of Agricultural Credit

India's agricultural credit flows through two channels.

Institutional (formal) sources:

• Commercial banks (including SBI and its associates)
• Co-operative banks (Primary Agriculture Credit Societies — PACS)
• Regional Rural Banks (RRBs) — 43 RRBs as of 2024
• NABARD (refinancing apex institution)
• Small Finance Banks and Micro-Finance Institutions

Non-institutional (informal) sources:

• Moneylenders — still 25–30% of agricultural credit, especially for small farmers
• Traders and commission agents who pay advance against crop
• Relatives and friends

India's Agricultural Credit Flow Target was Rs 20 lakh crore in 2022–23 (achieved). For 2024–25, the target is Rs 22 lakh crore.

4.2 Key Agricultural Finance Schemes

Kisan Credit Card (KCC)

• Launched 1998; provides revolving credit for crop cultivation, post-harvest needs, and allied activities
• Interest rate: 4% per annum (with 3% interest subvention; effective cost to farmer = 4%)
• 7.70 crore active KCC holders (2024)
• Extended to fishermen and animal husbandry farmers in 2020

Interest Subvention Scheme

• Short-term crop loans up to Rs 3 lakh at 7% interest; effective 4% for timely repayment
• Government pays 3% interest subvention to banks + 3% prompt repayment incentive to farmers

Agricultural Infrastructure Fund (AIF)

• Launched 2020 with corpus of Rs 1 lakh crore
• Long-term debt financing for post-harvest infrastructure: warehouses, cold chains, grading units, processing plants
• 3% interest subvention on loans up to Rs 2 crore for 7 years

NABARD's Role

• Refinances banks lending to agriculture (priority sector lending mandate)
• Issues Rural Infrastructure Development Fund (RIDF) — supports state governments' rural infrastructure projects
• Conducts NABARD Rural Finance Survey — comprehensive data on rural households
• 2023–24: NABARD extended Rs 6.04 lakh crore in refinance support

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