The farm credit target is likely to be raised by about 10 percent to a record Rs 12 lakh crore in the 2019-20 budget that is set to be presented on Feb. 1, according to sources. For the current fiscal, the government has set a credit target of Rs 11 lakh crore.
"The government has been increasing the credit target for the farm sector every year. This time too, the target is likely to be increased by around 10 percent or Rs 1 lakh crore to Rs 12 lakh crore for the 2019-20 fiscal," the sources said.
The agricultural credit flow has increased consistently over the years, exceeding the target set for each fiscal. For instance, credit worth Rs 11.68 lakh crore was given to farmers in 2017-18, much higher than the Rs 10 lakh crore target set for that year, they added.
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Similarly, crop loans worth Rs 10.66 lakh crore were disbursed in the 2016-17 fiscal, higher than the credit target of Rs 9 lakh crore.
Credit is a critical input in achieving higher farm output. Institutional credit will also help de-link farmers from non-institutional sources where they are compelled to borrow at usurious rates of interest, sources said.
Normally, farm loans attract an interest rate of 9 percent. However, the government has been providing interest subvention to make available short-term farm credit at an affordable rate and help boost farm output.
The government is providing 2 percent interest subsidy to ensure farmers get short-term farm loan of up to Rs 3 lakh at an effective rate of 7 percent per annum. An additional incentive of 3 percent is being given to farmers for prompt repayment of loans within due date, making the effective interest rate 4 percent.
The interest subvention is given to public sector banks, private lenders, cooperative banks and regional rural banks on use of own funds and to Nabard for refinancing RRBs and cooperative banks.
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