Agriculture Credit

Agriculture Credit

The Government has taken many policy initiatives for strengthening farm credit delivery systems for providing credit at affordable rates of interest to support the resource equipment of the agriculture sector. The emphasis of these policies has been on providing timely and adequate credit support to farmers with particular focus on small and marginal farmers and weaker sections of society to enable them to adopt modern technology and improved agriculture practices for increasing agricultural production and productivity. Policy initiatives for increasing the flow credit In order to improve the flow of credit and mitigate the distressing situation of farmers due to the problem of indebtedness, the Government of India announced on 2004 a special farm credit packing. The package, inter alia, envisaged that credit to agriculture sector will double in next three years. To improve the outreach among the poor and the informal sector, the SHG-Bank linkage programme was intensified. Banks have also been advised to finance Joint Liability Groups and Tenant Farmers Groups. To part of the measures announced by RBI, for Financial Inclusion, Banks have been advised to open “No Frills” Account and issue overdraft facilities to each such account.  Banks have also been advised to issue Credit Cards of Rs. 25000 without insisting on security and end use of Rs.25000 without insisting on security and end use of funds.

Banks have also been advised undertake, on a pilot basis, 100 per financial inclusion, in at least one district in each state.  The limit of collateral free farm has been increased from Rs. 50,000 to 1, 00,000. Kisan Credit card In order to ensure that all eligible farmers are provided with  adequate and timely credit support from banking system for agriculture and allied activities in a flexible and cost –effective manner, Kisan Credit card (KCC) Scheme for farmers was introduced in 1998-99 and is in operation throughout the country and is implemented by Commercial  Banks, Cooperative  Banks and RRBs. It has been decided to convert KCCs into smart cards to facilitate its operations through ATMs. Validity of KCC is for 5 years. Rate of interest on Agriculture Loans From Kharif 2006-07, farmers are receiving crop loans up to a principal amount of Rs. 3 lakh at 7 per cent of interest; Government is providing an additional 3 per cent interest subvention to those farmers who repay their short term crop loans as per schedule. Thus the effective rate of interest from such farmers becomes 4 per cent per annum.