- NABARD highlighted agricultural credit flow as structurally robust, projecting it to exceed ₹32.5 lakh crore in FY 2025-26.
NABARD
- National Bank for Agriculture and Rural Development was established in 1982 as India’s main statutory bank for agriculture and rural development.
- It was established on the recommendation of the CRAFICARD Committee, chaired by B. Sivaraman.
- It doesn’t lend directly to farmers but offers refinance to Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), and cooperative institutions.
Current Agri-Credit Composition
- Credit Pattern: It is skewed towards short-term loans (~60%) with low long-term investment credit, limiting capital formation.
- Regional imbalance: Southern states receive 48% of credit despite only 17% of cropped area, while the East (8.2%) and Central India (13.7%) remain under-financed.
- Exclusion: Landless labourers, tenant farmers, and sharecroppers remain excluded from formal credit due to the absence of clear land titles for collateral.
About India’s Agri-Credit Framework
- RBI governs agricultural credit and establishes Priority Sector Lending (PSL) norms, while NABARD manages its operations.
- Institutional Sources: Formal credit is provided by SCBs (over 70%), RRBs, and Cooperative Systems.
- The cooperative system includes PACS, DCCBs, and State Cooperative Banks for short-term credit, and Agriculture and Rural Development Banks (ARDBs) for long-term investment credit.
- Non-Institutional Sources: Informal lenders like moneylenders and traders account for nearly 28%.
Key Credit Mechanisms and Government Schemes
- PSL Mandate: RBI mandates 18% of Adjusted Net Bank Credit (ANBC) to be allocated to agriculture.
- KCC: Launched in 1998, the Kisan Credit Card provides timely short-term credit for crop and allied activities (Animal Husbandry and Fisheries).
- Interest Support: The Modified Interest Subvention Scheme (MISS) provides loans at 7%, reducible to 4% with prompt repayment.
- Capital Formation: Agriculture Infrastructure Fund (AIF) and Rural Infrastructure Development Fund (RIDF) support long-term agricultural asset creation.
Source (FE)
Frequently Asked Questions
What is NABARD?
NABARD is India’s apex statutory bank for agriculture and rural development established in 1982.
On whose recommendation was NABARD established?
NABARD was set up based on the recommendations of the CRAFICARD Committee chaired by B. Sivaraman.
Which regions are under-financed in agricultural credit?
Eastern (8.2%) and Central India (13.7%) receive significantly lower credit shares.
Who regulates agricultural credit in India?
The Reserve Bank of India (RBI) regulates agricultural credit and sets Priority Sector Lending norms.
What role does NABARD play in agricultural credit?
NABARD supervises and facilitates agricultural credit operations through refinancing and policy support.
