Budget 2018 may hike agriculture credit target to Rs 11 lakh cr as govt aims to get higher farm output

New Delhi: The farm credit target is likely to be raised by a whopping Rs 1 lakh crore to a record Rs 11 lakh crore in the Budget 2018-19 to improve credit flow in the agriculture sector, according to sources. In the current fiscal, the government has kept a credit target of Rs 10 lakh crore. Of which, Rs 6.25 lakh crore has already been disbursed in the first six months till September 2017, the government data showed.

“The government’s priority is agriculture. There is a possibility that the credit disbursal target for the agriculture sector will further be increased to Rs 11 lakh crore for the next fiscal,” sources said. Since credit is a critical input in achieving higher farm output, the institutional credit will help delink farmers from non-institutional sources of credit where they are compelled to borrow at usurious rates of interest, they said.

Normally, farm loan attracts an interest rate of 9 percent. But the government has been providing interest subvention to make available short-term farm credit at an affordable rate and help boost farm output. The government is providing 2 percent interest subsidy to ensure farmers get short-term farm loan of up to Rs 3 lakh at an effective rate of 7 percent per annum. An additional incentive of 3 percent is being given to farmers for prompt repayment of loans within due date, making an effective interest rate for them at 4 percent.

The interest subvention is given to public sector banks (PSBs), private lenders, cooperative banks and regional rural banks (RRBs) on use of own funds and to Nabard for refinance for RRBs and cooperative banks. It may be noted that all short-term crop loan accounts are being Aadhaar-linked from the current year. Even the Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans.