The agriculture sector always looks for credit from banking sector in order to continue with the sustainable farming systems. The agriculture sector is the back bone of a country, and it is the duty of government to facilitate the farming sector to increase agriculture production. The quick availability and access to adequate, timely and low cost credit from institutional sources is of great importance especially to small and marginal farmers.
The Government of India has initiated several policy measures to improve the accessibility of farmers from the institutional sources for its credit needs. The agricultural credit as disbursed through multi-agency network consisting of Commercial Banks, Regional Rural Banks and Cooperatives. The government used to fix agriculture credit disbursement target for the banking sector every year, and banks have consistently surpassed these targets. The banking institutions are duty bound to follow government and RBI guidelines in this regard.
The Banks were mandated to extend collateral-free agriculture loans up to ₹ 1 lakh and this limit of ₹ 1 lakh was fixed in the year 2010. Keeping in view the overall inflation, and rise in agriculture input costs since then, the Ministry of Finance has recently decided to raise the limit for collateral–free agriculture loans from ₹ 1 lakh to ₹ 1.6 lakh. This will enhance coverage of small and marginal farmers in the formal credit system. The circular to this effect was issued recently. Chief Executive Officer of Reserve Bank of India issued circular in the date of February 07.2019 No- RBI/2018-19/118. The circular mentions as follows;
Keeping in view the overall inflation and rise in agriculture input cost over the years since 2010, it has been decided to raise the limit for collateral free agricultural loans from the existing level of ₹1 lakh to ₹1.6 lakh. Accordingly, banks may waive margin requirements for agricultural loans up to ₹1.6 lakh”
The details of Agriculture Credit Targets fixed by the Government and the achievement by the Banks for the last three years resulted in increasing the productivity in the farming sector which is beneficial to the farmers. The government has initiated multiple steps recently for increasing flow of credit to the farming sector and a few such initiatives are listed below;
- Interest subvention to farmers
- Extension of interest subvention scheme to post harvest loans
- Collateral free loans
- Guidelines for providing relief in event of occurrence of natural calamities
- Kisan Credit Card Scheme
- Agriculture Debt Waiver and Debt Relief Scheme