**Executive Summary**
This report outlines the Government of India’s measures to strengthen the institutional credit framework for the agriculture and allied sectors, specifically targeting small and marginal farmers. Key initiatives include the enhancement of collateral-free loan limits effective January 1, 2025, the introduction of the PM Dhan Dhaanya Krishi Yojana in the 2025-2026 Union Budget, and the implementation of interest subvention schemes to ensure affordable credit flow.
**Key Points / Main Content**
**Lending Targets and Mandates**
* **Ground Level Credit (GLC):** The Government sets annual region-wise and agency-wise GLC targets for banks, including dedicated targets for allied activities like dairy, fisheries, and animal husbandry.
* **Priority Sector Lending (PSL):** Commercial and Cooperative banks must allocate at least 18% of their Adjusted Net Bank Credit to agriculture, with a specific 10% sub-target for Small and Marginal Farmers (SMFs).
* **District Framework:** An incentive/dis-incentive framework exists for districts to balance the flow of credit between high and low-performing areas.
**Credit Accessibility and Affordability**
* **Kisan Credit Card (KCC):** Provides affordable credit for agricultural inputs and working capital; since 2019, coverage includes animal husbandry and fisheries.
* **Modified Interest Subvention Scheme (MISS):** Offers short-term loans at a 7% interest rate, which reduces to 4% for farmers who practice prompt repayment.
* **Collateral-Free Loans:** The limit for collateral-free short-term agricultural loans was raised from Rs. 1.60 lakh to Rs. 2.00 lakh per borrower as of January 1, 2025.
**Institutional Support and Infrastructure**
* **NABARD Initiatives:** Prepares annual Potential Linked Credit Plans (PLP) for districts and provides short-term and long-term refinance to banks and NBFCs.
* **Rural Infrastructure:** The Rural Infrastructure Development Fund (RIDF) supports infrastructure creation to increase credit absorption capacity in rural areas.
* **PM Dhan Dhaanya Krishi Yojana (PM-DDKY):** A new scheme aimed at facilitating credit availability in districts with historically low agricultural credit disbursement.
* **Technology and Strengthening:** Ongoing steps to upgrade technology in Rural Cooperative Banks and Regional Rural Banks to improve service in backward areas.
**Impact Analysis**
**Small and Marginal Farmers (SMFs)**
**Impact**
SMFs, who constitute over 86% of the sector, benefit from increased access to credit without collateral requirements up to Rs. 2.00 lakh and significantly lower interest rates through prompt repayment incentives.
**Action Required**
Farmers should utilize Kisan Credit Cards for their credit needs and ensure prompt repayment to benefit from the reduced 4% interest rate.
**Commercial and Rural Banks**
**Impact**
Banks are mandated to meet specific PSL (18%) and GLC targets, requiring them to focus lending on agriculture and small farmers.
**Action Required**
Banks must align their lending portfolios to meet statutory targets and utilize NABARD’s refinance facilities to supplement their resources for short and long-term lending.
**NABARD**
**Impact**
Acts as the central coordinator for credit estimation and provides the necessary financial liquidity to various rural financial institutions.
**Action Required**
NABARD must continue preparing district-level PLPs and administering concessional refinance schemes for specific sectors like micro-food processing and solar rooftop projects.
Key Entities Referenced
NABARD: The apex regulatory body for rural banking that facilitates agricultural credit through refinance, credit planning, and the Rural Infrastructure Development Fund.
Kisan Credit Card (KCC): A credit delivery scheme providing farmers with affordable short-term loans for agricultural inputs and working capital for allied sectors like animal husbandry and fisheries.
Priority Sector Lending (PSL): An RBI regulatory framework mandating banks to allocate specific percentages of credit to agriculture, with focused sub-targets for small and marginal farmers.
PM Dhan Dhaanya Krishi Yojana (PM-DDKY): A government scheme launched to facilitate adequate availability of long-term and short-term credit in districts with low agricultural credit disbursement.
Modified Interest Subvention Scheme (MISS): A program offering short-term agricultural loans at a concessional interest rate of 7%, with additional incentives for prompt repayment.
Ministry of Finance
Government Strengthens Institutional Credit
Framework for Agriculture and Allied Sectors
Ground Level Credit (GLC) targets, Priority Sector Lending
norms and expanded Kisan Credit Card coverage enhance
access to timely and affordable credit
Higher collateral-free loan limits, interest subvention benefits
and NABARD refinance initiatives boost credit flow to small
and marginal farmers
Posted On: 17 MAR 2026 4:44PM by PIB Delhi
The Government has taken several measures to increase institutional credit flow to the agriculture sector,
including to the underserved agricultural segments.
Some of 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)
Cooperative 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 January 2025. 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.
NABARD has taken various steps to increase the credit flow to Agriculture sector which inter-alia
include:-
As part of RBI’s Lead Bank Scheme, NABARD 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.
To enhance Ground-Level Credit in Agriculture, NABARD extends refinance to banks to supplement their
resources for Short-Term (ST) and Long-Term (LT) lending for agriculture and allied activities.
Under Short Term refinance, NABARD extends refinance assistance to State Cooperative Banks (StCBs),
Regional Rural Banks (RRBs), and Small Finance Banks (SFBs) against crop loans and other loans
disbursed for agriculture and allied activities.
Under Long Term refinance, NABARD extends long term refinance support to Rural Financial
Institutions, Scheduled Commercial Banks, Small Finance Banks, Non-Banking Financial Companies
(NBFCs) to meet their credit need.
Apart from the above, NABARD through various refinance schemes, also provides concessional refinance
to specific sectors such as micro food processing, animal husbandry infrastructure development, solar
rooftop, aspirational and low PSL districts, financing under Agriculture Infrastructure Fund (AIF),
Primary Agricultural Credit Society as a Multi-Service Centre (PACs as MSC) & World’s Largest Grain
Storage Plan (WLGSP), and National Rural Livelihoods Mission (NRLM).
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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