**Executive Summary**
This report outlines measures taken by the Government and the Reserve Bank of India (RBI) to ensure seamless credit flow to the rural sector, specifically targeting agriculture, MSMEs, and Self-Help Groups (SHGs). Key provisions include updated Priority Sector Lending (PSL) mandates, an increase in collateral-free loan limits effective January 1, 2025, and various NABARD-led support programs. The document serves as an information brief provided to the Lok Sabha on March 30, 2026.
**Key Points / Main Content**
**Credit Mandates and Targets**
* **PSL Guidelines:** The RBI uses Priority Sector Lending guidelines and Ground Level Agriculture Credit (GLC) targets to expand Kisan Credit Card (KCC) coverage and institutional credit.
* **Lending Allocations:** Commercial Banks, Regional Rural Banks, Small Finance Banks, and Local Area Banks must allocate 18% of Adjusted Net Bank Credit (ANBC) or equivalent to agriculture.
* **Focus on Small Farmers:** A specific sub-target of 10% is prescribed for Small and Marginal Farmers (SMFs).
* **Equitable Distribution:** An incentive framework rewards districts with low credit flow, while a dis-incentive framework applies to districts with high credit flow to ensure balanced distribution.
**Financial Adjustments and Refinancing**
* **Collateral-Free Loans:** The limit for collateral-free short-term agricultural loans (including allied activities) was increased from ₹1.60 lakh to ₹2.00 lakh per borrower effective January 1, 2025.
* **Concessional Refinance:** Eligible Rural Financial Institutions (RFIs) can access funds (STCRCF, STRRBF, and LTRCF) created from PSL shortfalls to support lending.
**NABARD Support for SHGs and Rural Development**
* **Digital Integration:** Training for SHGs to onboard onto E-Commerce platforms, the Open Network for Digital Commerce (ONDC), and social media.
* **Skill Development:** Implementation of the “m-Suwidha” program for skill upgradation in women-led microenterprises.
* **Capacity Building:** Support for microfinance clients through the Financial Inclusion Fund (FIF).
* **Tribal Development:** Initiatives for SHG formation, health and sanitation camps, and microenterprise training under the Tribal Development Programme.
**Impact Analysis**
**Commercial and Co-operative Banks**
**Impact**
Banks are mandated to meet specific lending targets (18% for agriculture) and navigate a district-based incentive/dis-incentive framework.
**Action Required**
Banks must align their lending portfolios to meet PSL targets and SMF sub-targets while managing the increased limit for collateral-free loans.
**Small and Marginal Farmers (SMFs)**
**Impact**
Farmers benefit from increased access to institutional credit and a higher ceiling for loans without requiring collateral.
**Action Required**
Farmers may apply for short-term agricultural and allied activity loans up to the new ₹2.00 lakh collateral-free limit.
**Self-Help Groups (SHGs) and Women Entrepreneurs**
**Impact**
These groups receive dedicated support for digital transition, skill development, and financial literacy.
**Action Required**
SHGs should engage with NABARD programs to onboard onto digital commerce platforms and utilize "m-Suwidha" for enterprise growth.
**Rural Financial Institutions (RFIs)**
**Impact**
Eligible institutions gain access to concessional refinancing to maintain liquidity.
**Action Required**
RFIs should utilize available funds like STCRCF and LTRCF to support their rural lending operations.
Key Entities Referenced
Priority Sector Lending (PSL) Guidelines: Regulatory framework issued by RBI mandating banks to allocate specific percentages of credit to agriculture and small farmers.
Reserve Bank of India (RBI): The central bank responsible for issuing PSL guidelines, maintaining liquidity, and raising collateral-free loan limits for agriculture.
NABARD: The apex regulatory body for rural banks in India that implements support schemes for Self-Help Groups and manages various rural credit funds.
Kisan Credit Card (KCC): A key policy instrument used to scale up institutional credit coverage and provide timely credit to farmers.
Financial Inclusion Fund (FIF): A fund managed by NABARD to support training and capacity building for microfinance clients and Self-Help Groups.
Ministry of Finance
Government and RBI Measures Ensure Seamless
Rural Credit Flow
Consistent growth in priority sector lending supports
agriculture, MSMEs and self-help groups
Posted On: 30 MAR 2026 3:34PM by PIB Delhi
Reserve Bank of India (RBI) endeavours to maintain sufficient liquidity in the banking system to ensure
that the productive requirements of the economy including rural sector are met and transmission to market
rates remains robust.
The Government has taken various measures to ensure uninterrupted credit flow for rural development
initiatives, including SHGs, which inter-alia include:
The Priority Sector Lending (PSL) Guidelines of Reserve Bank of India (RBI) issued to banks and Ground
Level Agriculture Credit (GLC) targets by the Government to banks act as key policy instruments in
scaling up Kisan Credit Card (KCC) coverage and enhancing institutional credit to farmers.
As per PSL guidelines issued by RBI, Commercial Banks including Regional Rural Banks, Small Finance
Banks, Local Area Banks and Primary (Urban) Co-operative Banks (UCBs) other than Salary Earners’
Banks are mandated to allocate at least 18% of their Adjusted Net Bank Credit (ANBC) or Credit
Equivalent of Off-Balance Sheet Exposures (CEOBSE), whichever is higher, to agriculture, out of which a
sub-target of 10 percent is prescribed for Small and Marginal Farmers (SMFs). Further, it also prescribes
an incentive framework for districts with comparatively lower flow of credit to priority sector which also
include credit to agriculture and Small & Marginal farmers and a dis-incentive framework for districts
with comparatively higher flow of priority sector credit for more equitable distribution of credit flow to
the agricultural sector.
The limit for collateral free short-term agricultural loans, including loans for allied activities, has been
raised from ₹ 1.60 lakh to ₹ 2.00 lakh per borrower by RBI w.e.f. 01 January 2025.
Concessional refinance is provided to eligible Rural Financial Institutions (RFIs) through various funds
created out of PSL shortfall viz. Short-Term Cooperative Rural Credit Fund (STCRCF), Short-Term RRB
Credit Refinance Fund (STRRBF) and Long-Term Rural Credit Fund (LTRCF)
NABARD implements the following schemes/programmes for supporting SHGs:
o Training support to SHGs for onboarding onto E-Commerce platforms/ Open
Network for Digital Commerce (ONDC)/ social media platforms
o Skill upgradation for women led microenterprises through “m-Suwidha”
o Support for training and capacity building of microfinance clients through
Financial Inclusion Fund (FIF) of NABARDo Tribal Development Programme wherein activities such as SHG formation, health and
sanitation camps, training on microenterprise development, etc. are supported.
This information was given by the Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in
Lok Sabha today.
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