According to reports, with the goal of doubling farmers' income by 2022, the government is expected to increase the farm credit target to around Rs 19 lakh crore in Budget 2021-22, which will be presented on February 1.
The government has set a farm loan goal of Rs 15 lakh crore for the current fiscal year. Every year, the government has raised the credit target for the agriculture sector and this time around, the target for 2021-22 is likely to be increased to about Rs 19 lakh crore, sources said.
‘In the field of agricultural credit, non-banking finance companies (NBFCs) and co-operatives are involved. There will be an extension of the NABARD refinance system. The target for agricultural credit for the year 2020-21 was set at Rs 15 lakh crore,' Finance Minister Nirmala Sitharaman said while announcing the 2020-21 Budget.
Over the years, the flow of agricultural credit has steadily risen, exceeding the target set for each fiscal year. For instance, farmers were provided with credit worth Rs 11.68 lakh crore in 2017-18, far higher than the Rs 10 lakh crore target set for that year, they added.
Likewise, in the 2016-17 fiscal years crop loans worth Rs 10.66 lakh crore were disbursed, higher than the credit target of Rs 9 lakh crore.
In achieving higher farm production, credit is a vital input. According to the sources, Institutional credit would also help delink farmers from non-institutional sources where, they are required to borrow at usurious interest rates.
Farm loans usually attract an interest rate of 9 per cent. The nation, however, has been offering interest subsidies to make short-term farm loans available at an attractive rate and help raise farm production.
A 2 percent interest subsidy is offered by the government to ensure that farmers earn short-term farm loans of up to Rs 3 lakh at an effective rate of 7 percent per annum.
Farmers are given an extra 3 per cent bonus for timely repayment of loans within the due date, making the maximum interest rate 4 per cent.
Interest subsidies are granted to public sector banks (PSBs), private lenders, cooperative banks and regional rural banks (RRBs) on the basis of their own funds, and to NABARD for the refinancing of RRBs and cooperative banks.
