Credit to the agriculture sector by commercial banks and regional rural banks is likely to cross Rs 28 lakh crore, a new record, in the current fiscal due to an increased formalisation of the rural credit structure, Shaji KV, chairman of Nabard, said on Sunday.
“In the last 10 years, the average annual growth in the flow of agricultural credit has been in double digit at 13%. We will be crossing Rs 28 lakh crore of credit flow in the current fiscal,” Shaji told FE.
The agri-credit disbursement target of a record Rs 27.5 lakh crore was set for 2024-25, 31% higher compared with the target of Rs 21 lakh crore for FY24. Banks had disbursed Rs 25.49 lakh crore in 2023-24 under term and crop loans, a rise of 15% compared to FY23. The growth this year is seen to be around 10%.
“With a rise in the agri-credit flow, the share of the informal sector in credit disbursement is declining. This indicates formalisation of rural credit which would ensure a lot of margins with the rural population,” he said on the sidelines of ‘Grameen Bharat Mahotsav’, being organised by Nabard in collaboration with the Department of Financial Services.
The finance ministry has earmarked Rs 16 lakh crore for short-term crop loans and Rs 11.5 lakh crore as term loans, to be disbursed in 2024-25. Commercial banks will provide Rs 20.62 lakh crore, or 75%, of the total credit.
Of the total agri-credit flow, Rs 4.2 lakh crore has been earmarked for short-term loans to the livestock sector – dairy, fisheries and poultry.
To address this imbalance in credit flow, National Bank for Agriculture and Rural Development (Nabard) would use digitised credit record of farmers through Agri Stack, an initiative of the agriculture ministry, which would create a registry of farmers, village land maps and crop sown, Shaji said.
Last fiscal, credit disbursal to Tamil Nadu was highest at Rs 4.39 lakh crore, (17.6% of disbursal in the country), followed by Andhra Pradesh at Rs 2.96 lakh crore or 12% of disbursal.
Shaji said Nabard is aiming at launching the second part of the Rs 1,000-crore Nabventures fund focused on startups in the agriculture and allied sector. Nabard, in collaboration with the agriculture ministry, launched a Rs 750-crore agri fund last year for start-ups and rural enterprises.
Under the modified interest subvention scheme, farmers holding Kisan Credit Cards are provided loans of up to Rs 3 lakh at 7% interest per annum to meet working capital requirements. The scheme provides additional interest subvention of 3% for prompt repayment, reducing the effective rate of interest to 4%.