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 Page 1


Lecture 12 
Continued
Capstone IAS Learning
Page 2


Lecture 12 
Continued
Capstone IAS Learning
Agriculture Credit
Timely availability & access to credit both short term & long term credit from formal 
sources at affordable rates of interest are essential to improve productivity in 
agriculture. 
Access to institutional credit enables farmer to enhance productivity by investing in 
machinery & purchase of variable inputs like fertilisers, quality seeds & manure. 
However, there is a predominance of informal sources of credit for farmers, which is a 
concern. (NSSO: 40% of agri-credit still come from informal sources). 
There is a need to increase institutional credit for farmers. 
Regional disparity in access to institutional credit also needs to be addressed. 
Coverage of institutional credit is quite low in eastern and north eastern regions.
Page 3


Lecture 12 
Continued
Capstone IAS Learning
Agriculture Credit
Timely availability & access to credit both short term & long term credit from formal 
sources at affordable rates of interest are essential to improve productivity in 
agriculture. 
Access to institutional credit enables farmer to enhance productivity by investing in 
machinery & purchase of variable inputs like fertilisers, quality seeds & manure. 
However, there is a predominance of informal sources of credit for farmers, which is a 
concern. (NSSO: 40% of agri-credit still come from informal sources). 
There is a need to increase institutional credit for farmers. 
Regional disparity in access to institutional credit also needs to be addressed. 
Coverage of institutional credit is quite low in eastern and north eastern regions.
Steps by government to promote 
agricultural credit
National Bank for Agriculture and Rural Development (NABARD) 
-
It is the apex body for developmental credit in rural areas. 
-
It was established in 1982, under NABARD Act of 1981. 
-
Apart from agricultural credit, NABARD also looks after the 
development of cottage industry, small scale and village industry, 
and other rural industries. 
-
It supervises State Cooperative Banks(SCBs), District Cooperative 
Central Banks(DCCBs) and Regional Rural Banks(RRBs) and conducts 
statutory inspections of these banks. 
-
It provides Refinance facility to SCBs, RRBs, Commercial Banks, State 
Cooperative Agriculture and Rural Development Banks(SCARDBs) and 
other financial institutions approved by RBI. 
-
It also manages Rural Infrastructure and Development Fund(RIDF). 
Page 4


Lecture 12 
Continued
Capstone IAS Learning
Agriculture Credit
Timely availability & access to credit both short term & long term credit from formal 
sources at affordable rates of interest are essential to improve productivity in 
agriculture. 
Access to institutional credit enables farmer to enhance productivity by investing in 
machinery & purchase of variable inputs like fertilisers, quality seeds & manure. 
However, there is a predominance of informal sources of credit for farmers, which is a 
concern. (NSSO: 40% of agri-credit still come from informal sources). 
There is a need to increase institutional credit for farmers. 
Regional disparity in access to institutional credit also needs to be addressed. 
Coverage of institutional credit is quite low in eastern and north eastern regions.
Steps by government to promote 
agricultural credit
National Bank for Agriculture and Rural Development (NABARD) 
-
It is the apex body for developmental credit in rural areas. 
-
It was established in 1982, under NABARD Act of 1981. 
-
Apart from agricultural credit, NABARD also looks after the 
development of cottage industry, small scale and village industry, 
and other rural industries. 
-
It supervises State Cooperative Banks(SCBs), District Cooperative 
Central Banks(DCCBs) and Regional Rural Banks(RRBs) and conducts 
statutory inspections of these banks. 
-
It provides Refinance facility to SCBs, RRBs, Commercial Banks, State 
Cooperative Agriculture and Rural Development Banks(SCARDBs) and 
other financial institutions approved by RBI. 
-
It also manages Rural Infrastructure and Development Fund(RIDF). 
Interest Subvention Scheme 
-
Under it, farmer can effectively avail short term crop loans up to 
Rs. 3 lakh payable within one year at only 4% per annum. 
-
It also gives loans at concessional rate of 7% for storage in ware 
houses accredited by Warehousing Development Regulatory Authority 
(WDRA) for up to 6 months post harvest for avoiding distress sale. 
Kisan Credit Card  
-
It is a short term credit scheme that was introduced in 1998. 
-
All individuals/Joint borrowers who are owner cultivators; Tenant 
farmers, Share Croppers; SHGs etc are eligible for this scheme. 
-
It has following objectives : providing adequate and timely credit 
to farmers under a single window, meet short term credit 
requirements, meets post harvest expenses, meets consumption 
credit requirement, provides working capital for maintainence of 
farm assets etc.
Page 5


Lecture 12 
Continued
Capstone IAS Learning
Agriculture Credit
Timely availability & access to credit both short term & long term credit from formal 
sources at affordable rates of interest are essential to improve productivity in 
agriculture. 
Access to institutional credit enables farmer to enhance productivity by investing in 
machinery & purchase of variable inputs like fertilisers, quality seeds & manure. 
However, there is a predominance of informal sources of credit for farmers, which is a 
concern. (NSSO: 40% of agri-credit still come from informal sources). 
There is a need to increase institutional credit for farmers. 
Regional disparity in access to institutional credit also needs to be addressed. 
Coverage of institutional credit is quite low in eastern and north eastern regions.
Steps by government to promote 
agricultural credit
National Bank for Agriculture and Rural Development (NABARD) 
-
It is the apex body for developmental credit in rural areas. 
-
It was established in 1982, under NABARD Act of 1981. 
-
Apart from agricultural credit, NABARD also looks after the 
development of cottage industry, small scale and village industry, 
and other rural industries. 
-
It supervises State Cooperative Banks(SCBs), District Cooperative 
Central Banks(DCCBs) and Regional Rural Banks(RRBs) and conducts 
statutory inspections of these banks. 
-
It provides Refinance facility to SCBs, RRBs, Commercial Banks, State 
Cooperative Agriculture and Rural Development Banks(SCARDBs) and 
other financial institutions approved by RBI. 
-
It also manages Rural Infrastructure and Development Fund(RIDF). 
Interest Subvention Scheme 
-
Under it, farmer can effectively avail short term crop loans up to 
Rs. 3 lakh payable within one year at only 4% per annum. 
-
It also gives loans at concessional rate of 7% for storage in ware 
houses accredited by Warehousing Development Regulatory Authority 
(WDRA) for up to 6 months post harvest for avoiding distress sale. 
Kisan Credit Card  
-
It is a short term credit scheme that was introduced in 1998. 
-
All individuals/Joint borrowers who are owner cultivators; Tenant 
farmers, Share Croppers; SHGs etc are eligible for this scheme. 
-
It has following objectives : providing adequate and timely credit 
to farmers under a single window, meet short term credit 
requirements, meets post harvest expenses, meets consumption 
credit requirement, provides working capital for maintainence of 
farm assets etc.
Pledge Loan Scheme 
-
The aim of pledge loan scheme is to protect the interests of the farmers against 
distress sale of agricultural produce by providing short term loan against the 
pledge of the produce at zero/low interest rates. 
-
The idea is to provide access to both easy credit and safe and scientific storage. 
SHG-Bank Linkage Programme  
-
The programme was started at the initiative of NABARD in 1992 to link the 
unorganised sector with the formal banking sector. 
-
Under this programme, banks were allowed to open savings accounts for Self-
Help Groups (SHGs). 
-
SHGs : these are registered/unregistered entities which usually has a membership 
of 15 to 20 members from very low income families, usually women. They 
mobilise savings form members and uses the pooled funds to give loans to the 
needy members. 
-
Under this programme, banks provide loans to the SHGs against group guarantee 
and the quantum of loan could be several times the deposits placed by such 
SHGs with the banks 
-
Lending to SHGs would be a part of a bank’s Priority sector targets.
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FAQs on PPT: Agriculture Credit - Crash Course for UPSC aspirants

1. What is agricultural credit and why is it important for farmers?
Agricultural credit refers to the financial support provided to farmers to meet their farming needs, such as purchasing seeds, fertilizers, machinery, or managing their day-to-day operations. It is important for farmers as it enables them to invest in their farms, increase productivity, and improve their living standards.
2. How can farmers apply for agricultural credit?
Farmers can apply for agricultural credit through various channels, such as banks, cooperative societies, or government schemes. They need to submit the required documents, including land records, income proofs, and a detailed project report outlining their farming activities and financial requirements.
3. What are the different types of agricultural credit available to farmers?
There are different types of agricultural credit available to farmers, including crop loans, term loans, and agricultural gold loans. Crop loans are short-term loans provided for cultivation purposes, term loans are long-term loans for purchasing machinery or land development, and agricultural gold loans are loans provided against the collateral of gold ornaments.
4. Are there any government schemes or subsidies available for agricultural credit?
Yes, several government schemes and subsidies are available to support farmers in accessing agricultural credit. For example, in India, the government has implemented schemes like Kisan Credit Card (KCC), Pradhan Mantri Fasal Bima Yojana (PMFBY), and interest subvention schemes that provide financial assistance and interest rate benefits to farmers.
5. What factors are considered by banks or financial institutions when granting agricultural credit?
Banks and financial institutions consider various factors before granting agricultural credit, including the borrower's credit history, repayment capacity, collateral offered, the viability of the farming project, and the borrower's previous farming experience. These factors help them assess the risk associated with lending and determine the loan amount and interest rate.
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