Agriculture and Rural Development Agriculture and Cooperation

Ensure cheaper agriculture inputs, and strengthen and expand rural credit facilities.

In Progress
Last Updated: Friday 09 March 2018
Wednesday 01 February 2017Press Information Bureau

Credit is a critical input in achieving high productivity and overall production in the agricultural sector. During 2017-18, the Union Finance Minister announced Rs. 10 lakh crores as Agriculture Credit Target.

The flow of institutional credit to the agriculture sector from 2000 till 2016 is represented in the table below:

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi, has also approved an Interest Subvention Scheme (ISS) for farmers for the year 2017-18. This will help farmers getting short term crop loan up to Rs. 3 lakh payable within one year at only 4% per annum. The Government has earmarked a sum of Rs. 20,339 crore for this purpose. The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds, and to NABARD for refinance to RRBs and Cooperative Banks.

The objective of the scheme is to make available at ground level, agricultural credit for Short Term crop loans at an affordable rate to give a boost to agricultural productivity and production in the country. The Central Government will provide interest subvention of 5 per cent per annum to all prompt payee farmers for short term crop loan up to one year for loan up to Rs. 3 lakhs borrowed by them during the year 2017-18. Farmers will thus have to effectively pay only 4% as interest. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.

However, as per evidence submitted by the Department of Agriculture, Cooperation, and Farmers' Welfare to the Departmentally-related Parliamentary Standing Committee, as far as budgetary support is concerned for the past several years, the budgetary allocation for implementation of the Interest Subvention Scheme has been far below the actual requirement, resulting in backlog of settlement of audited claims received from banks. At the time of transfer of Interest Subvention Scheme to this Department the anticipated carry over liabilities of the Scheme from 2013-14 to 2015-16 were approximately Rs. 36,330 crores. Of this estimated claim, about Rs. 12,858 crores will be settled in 2016-17 leaving a balance of Rs. 23,472 crores. Further, for 2016-17 the estimated claim under Interest Subvention Scheme (ISS) is Rs. 18,276 crores. Therefore, against the cumulative estimation of Rs. 41,748 crores only an amount of Rs. 15,000 crores has been made available for implementation of Interest Subvention Scheme during 2017-18. In this regard it may be worth mentioning that against this anticipated amount audited claims of only Rs. 9,000 odd crores have been received for payment. For FY 2017-18 the claims estimated at approximately Rs. 20,300 crores and are likely to rise in subsequent years.


The Government has prioritized lending towards investments in agriculture and allied sector to enhance capital formation in agriculture. Accordingly, the Government of Indida has allocated additional resources of Rs.15,000 crore for 2016-17 to the Long Term Rural Credit Fund (LTRCF) set up in NABARD, which is met out of the shortfall in Priority Sector Lending (PSL) targets. The Cooperative Banks/RRBs are, therefore, able to draw much higher refinance support from NABARD for financing medium and long term agricultural loans during 2016-17.

In order to support the agriculture sector with the help of effective agriculture credit and focus on small and marginal farmers, the Finance Minister proposed to allocate Rs. 25,000 crore to the corpus of Rural Infrastructure Development fund (RIDF) set up in NABARD; Rs. 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund; and Rs. 15,000 crore for Short Term RRB Refinance Fund.

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