Introduction

In the first nine months of the current fiscal year, farm loan disbursals have exceeded 90 percent of the Budget estimate, prompting expectations of a significant hike in the Interim Budget for the next fiscal year (2024-25).
Finance Minister had set a target of ₹20 lakh crore for agriculture credit during the previous fiscal year (2023-24).

Budget Promises and Performance

Credit Target Increase: Finance Minister Sitharaman had announced an agriculture credit target of ₹20 lakh crore for FY 2023-24. The current disbursement data indicates that this target is likely to be exceeded.
Sectoral Focus: The Ministry reported that credit disbursed to the Animal Husbandry and Fisheries sector in FY 2023-24 reached ₹1,91,412 crore, constituting 65 percent of the ₹2.93 lakh crore target.
Working Capital and Term Loans: Disbursements included over ₹77,000 crore as working capital and over ₹1.13 lakh crore as term loans.

Significant Growth: Agricultural credit has witnessed substantial growth from ₹7.3 lakh crore in FY 2013-14 to ₹21.55 lakh crore in FY 2022-23, driven by the success of the KCC scheme.
Operative KCC Accounts: The KCC scheme, facilitating timely and hassle-free credit, boasts over 7.36 crore operative accounts as of the end of 2023.
Interest Subvention: Concessional interest rates, with a 7 percent lending rate and a 1.5 percent per annum interest subvention, were offered for short-term crop and allied activity loans up to ₹3 lakh through KCC.

	Details
Objective	To provide timely and flexible credit support to farmers for various agricultural and related needs.
Launch	Introduced in 1998 to issue KCC to farmers, facilitating the purchase of agricultural inputs and cash withdrawals for production needs.
Credit Support	Short-term credit for crop cultivation. Post-harvest expenses and produce marketing loans. Household consumption needs. Working capital for farm assets maintenance and allied activities. Investment credit for agriculture and allied activities.
Implementing Agencies	Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, and Cooperatives.
Eligible Farmers	Individual and joint borrowers who are owner cultivators. Tenant farmers, oral lessees, and sharecroppers. Self Help Groups (SHGs) or Joint Liability Groups (JLGs) of farmers, including tenant farmers and sharecroppers.
Maximum Permissible Limit (MPL)	The short-term loan limit for the 5th year, plus the estimated long-term loan requirement, determines the KCC limit.

RBI Mandate: RBI mandates a priority sector lending target for banks, with a specific allocation of 18 percent for agriculture and a 10 percent sub-target for Small and Marginal Farmers (SMFs) for FY 2023-24.
Prompt Repayment Incentive (PRI): An additional 3 percent PRI is provided for prompt and timely repayment, effectively reducing the interest rate to 4 percent per annum.
Collateral-Free Agriculture Loans: RBI is set to raise the limit for collateral-free agriculture loans to ₹1.6 lakh from ₹1 lakh, aiming to enhance the coverage of small and marginal farmers.
Streamlined Lending Practices: Banks have streamlined lending by eliminating ‘no dues’ certificates for small loans up to ₹50,000 and accepting alternative documentation or affidavits for loans to specific categories of farmers.

Joint Liability Groups (JLGs): NABARD’s creation of ‘Joint Liability Groups’ has facilitated lending without collateral to tenant/landless farmers and non-farm workers, fostering trust between banks and JLG members.
JLGs Performance: By March 31, 2023, a total of 257.9 lakh JLGs had been formed and linked to credit, contributing to the broader financial inclusion agenda.

The surge in farm loan disbursals indicates the success of various government initiatives, particularly the KCC scheme, in promoting financial inclusion and supporting the agricultural sector.
The likely increase in the agriculture credit target in the upcoming Interim Budget underscores the continued commitment to rural financing and development.