**Executive Summary**
This document outlines targeted policy measures by the Government of India to boost credit flow to the agriculture sector, especially for small and marginal farmers. Key initiatives include raising the collateral-free loan limit to ₹2 lakh, expanding the Kisan Credit Card (KCC) scheme, and providing interest subvention. These measures aim to strengthen credit access and support agricultural and allied activities.
**Key Points / Main Content**
* **Ground Level Credit (GLC) Targets:**
* The Government sets annual GLC targets for agriculture and allied sectors, broken down by region, agency (banks), and loan type (crop/term).
* Dedicated targets for allied activities (dairy, fisheries, animal husbandry) were introduced from 2021-22.
* **Priority Sector Lending (PSL):**
* Commercial banks, RRBs, SFBs, Local Area Banks, and UCBs (excluding salary earners' banks) must allocate at least 18% of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBSE) to agriculture.
* A sub-target of 10% within the agriculture PSL is prescribed for Small and Marginal Farmers (SMFs).
* An incentive framework exists for districts with lower credit flow and a disincentive for those with higher flow within priority sectors.
* **Kisan Credit Card (KCC):**
* KCC provides timely and affordable credit for agricultural inputs and production needs.
* Since 2019, the scheme covers working capital for animal husbandry, dairying, and fisheries.
* **Modified Interest Subvention Scheme (MISS):**
* Offers short-term agricultural loans at a concessional 7% interest rate via KCC.
* An additional 3% incentive is provided for prompt repayment, reducing the effective interest rate to 4%.
* **Collateral-Free Loans:**
* The limit for collateral-free short-term agricultural loans, including for allied activities, has been raised from ₹1.60 lakh to ₹2.00 lakh per borrower, effective January 1, 2025.
* This enhances credit accessibility and reduces borrowing costs for farmers, particularly SMFs.
* **Rural Infrastructure Development:**
* The Government, through NABARD, allocates funds under the Rural Infrastructure Development Fund to support rural infrastructure creation, enhancing credit absorption capacity.
* **PM Dhan Dhaanya Krishi Yojana (PM-DDKY):**
* Launched as per the Union Budget 2025-2026, this scheme aims to facilitate adequate long-term and short-term credit in districts with low agricultural credit disbursement.
* **Strengthening Rural Financial Institutions:**
* Steps are being taken to upgrade technology and strengthen Rural Financial Institutes (Rural Cooperative Banks, Regional Rural Banks) operating in rural and backward areas.
* **Potential Linked Credit Plan (PLP):**
* NABARD, as part of the Lead Bank Scheme, prepares district-wise PLPs to estimate credit potential.
* Based on PLP aggregation, past trends, and government priorities, Ground Level Credit targets are set.
* NABARD provides financial support to financial institutions to augment resources and provide liquidity for farmers' credit needs.
**Impact Analysis**
* **Farmers (especially Small and Marginal Farmers):**
* **Impact:** Enhanced credit accessibility, reduced borrowing costs due to higher collateral-free loan limits and interest subvention, timely access to credit for inputs and production.
* **Action Required:** Utilize the expanded KCC scheme, benefit from reduced interest rates by repaying loans promptly, and access credit for agricultural and allied activities.
* **Banks and Financial Institutions (Commercial Banks, RRBs, SFBs, UCBs, Cooperative Banks, NBFCs/mFIs):**
* **Impact:** Mandated to meet increased PSL targets for agriculture, particularly for SMFs. May need to adjust lending strategies to meet targets and leverage incentive/disincentive frameworks.
* **Action Required:** Comply with PSL guidelines, allocate credit as per mandates, and provide support to financial institutions as facilitated by NABARD for increased liquidity.
* **Government and Regulatory Bodies (Ministry of Finance, RBI, NABARD):**
* **Impact:** Responsible for setting targets, formulating policies, overseeing implementation, and providing financial support.
* **Action Required:** Continue to monitor credit flow, review and adjust policies as needed, and facilitate the implementation of schemes through various agencies.
Key Entities Referenced
Kisan Credit Card (KCC): A scheme providing farmers with timely and affordable credit for agricultural inputs and covering working capital for allied activities.
Priority Sector Lending (PSL): Guidelines issued by the RBI mandating banks to allocate a percentage of their credit to agriculture, with a sub-target for Small and Marginal Farmers.
Modified Interest Subvention Scheme (MISS): A scheme offering short-term agricultural loans at a concessional interest rate of 7% through Kisan Credit Cards, with an additional incentive for prompt repayment.
PM Dhan Dhaanya Krishi Yojana (PM-DDKY): A scheme launched to facilitate adequate availability of long-term and short-term credit in districts with low agricultural credit disbursement.
NABARD: An institution that provides allocation under the Rural Infrastructure Development Fund and financial support to various financial institutions for agricultural credit.
Ministry of Finance
Government Boosts Credit Flow to Agriculture
Sector through Targeted Policy Measures
Measures include raising limit of collateral-free agricultural
loans to ₹2 lakh, expanding Kisan Credit Card coverage,
providing 7% interest subvention, and PM- Dhan Dhaanya
Krishi Yojana to strengthen credit access for small and
marginal farmers among others
Posted On: 10 MAR 2026 3:34PM by PIB Delhi
The Government has taken several measures to increase institutional credit flow to the agriculture sector,
including to the underserved agricultural segments. These measures inter-alia includes the following:
i. The Government fixes Ground Level Credit (GLC) targets for agriculture and allied sector
every year which banks are required to achieve during the financial year. These targets are set
region wise, agency-wise (Scheduled Commercial Banks, Regional Rural Banks & Rural
Cooperative banks) and loan category wise (crop and term loan). Beginning in 2021–22,
dedicated targets for allied activities under GLC were introduced to provide focused credit
support for sectors such as dairy, fisheries, and animal husbandry.
ii. In terms of extant guidelines on Priority Sector Lending (PSL) 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).
iii. Further, PSL guidelines also prescribe an incentive framework for districts with
comparatively lower flow of credit and a dis-incentive framework for districts with
comparatively higher flow of priority sector credit which also include credit to agriculture and
Small & Marginal farmers.
iv. Kisan Credit Card (KCC) provides farmers with timely and affordable credit for purchasing
agricultural inputs such as seeds, fertilizers, and pesticides, as well as for meeting cash
requirements related to crop production and allied activities. Since 2019, KCC scheme has
been extended to cover working capital requirement of animal husbandry, dairying and
fisheries.
v. The Government of India’s Modified Interest Subvention Scheme (MISS) offers short-term
agricultural loans to farmers at a concessional interest rate of 7% through Kisan Credit Cards
(KCC). Farmers who repay promptly receive an additional 3% incentive, effectively reducing
their interest rate to just 4%.
vi. The limit for collateral free short-term agricultural loans, including loans for allied activities,
has been raised from Rs.1.60 lakh to Rs.2.00 lakh per borrower by RBI w.e.f. 01 January2025. This move enhances credit accessibility, particularly for small and marginal farmers
(over 86% of the sector), who benefit from reduced borrowing costs and the removal of
collateral requirements.
vii. The Government through NABARD provides allocation under Rural Infrastructure
Development fund to support the rural infrastructure creation which creates credit absorption
capacity in rural areas of the country.
viii. As announced in Union Budget for 2025-2026, the Government has launched PM Dhan
Dhaanya Krishi Yojana (PM-DDKY). One of the objectives of the scheme is to facilitate
adequate availability of long-term and short-term credit in districts with low agricultural
credit disbursement.
ix. The Government has also taken various steps like technology upgradation etc. to strengthen
Rural Financial Institutes (Rural Cooperative Banks and Regional Rural Banks) which are
primarily operating in rural and backward areas of the country.
Apart from the above NABARD as part of RBI’s Lead Bank Scheme, prepares the Potential Linked Credit
Plan (PLP) of each district every year for estimation of credit potential under Priority Sector which are
consolidated at the state level. Based on the state level aggregation of PLPs, past trends, government
priorities etc., Government in consultation with NABARD set the Ground Level Credit Target to
agriculture. Further, NABARD provides financial support to Financial Institutions viz. Regional Rural
Banks, Cooperative banks, Commercial banks, NBFCs/mFIs to augment their resources and provide
adequate liquidity so as to enable them to meet the credit needs of farmers during cropping and harvesting
seasons.
This information was given by the Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in
Rajya Sabha today.
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