Credit to the agriculture sector by commercial banks and regional rural banks is likely to cross Rs 31.5 lakh crore, a new record, in FY26 due to an increased formalisation of the rural credit structure, a senior official with Nabard said.
In FY25, commercial banks, cooperatives and regional rural banks had disbursed over Rs 28.98 lakh crore out of which around 60% was towards short-term crop loans and rest was towards investment loans in agriculture and allied sectors.
“We are expect total agri-credit flow in the current fiscal to be around Rs 31.5 lakh crore,” Ajay k Sood, deputy managing director, Nabard, told FE.
He said despite a sharp spike in credit flow to the agricultural and allied sector, the Nabard is trying to address the regional imbalance in the credit flow through preparing potential linked credit plans.
“We working with banks towards improving credit culture especially in north-eastern India by providing collateral in terms of social guarantee or a specialised fund and insurance products,” Sood said.
Currently Banks follow district-wise potential linked credit plans each year to boost the flow of institutional credit to priority sector activities such as crop loans and term loans for agricultural and allied enterprises.
Sood said there are alsod discussions for providing special refinance terms for ‘aspirational districts,’ where rate of interest would be lower. There are also discussions to provide financial assistance to tenant farmers.
In January,2025, Shaji KV, chairman, Nabard had stated that with the rise in the agri-credit flow, the share of the informal sector in credit disbursement is declining. “In the last 10 years, the average annual growth in the flow of agricultural credit has been in double digit at 13%,” he had stated.
Commercial banks usually provide 75% of the total credit-flow while rest is disbursed through cooperative and regional rural banks.
Under the modified interest subvention scheme (MISS), farmers holding Kisan Credit Cards (KCCs) 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%.
However, for 2025-26, the government has announced that the agri-credit limit is being enhanced to Rs 5 lakh annually. MISS also includes post-harvest loans against negotiable warehouse receipts (NWRs) for small holders farmers with KCCs.
At present, there are 77.1 millin operational KCC holders. This includes 1.24 lakh and 44.4 lakh KCCs issued to fisheries and animal husbandry activities, respectively.
If the short-term loan is taken for allied activities other than crop husbandry, the loan amount is limited to Rs.2 lakhs only.
Recently, Niti Aayog Member Ramesh Chand said that a criterion needs to be fixed for allocation of farm credit to state governments on the basis of their respective farm outputs to ensure that the subsidised short-term crop loans are not concentrated in a few states or diverted for non-agricultural purposes.
