The Centre has introduced a series of policy measures aimed at improving institutional credit flow to the agriculture sector, particularly focusing on underserved segments, the government informed Parliament on Tuesday.

Minister of State for Finance Pankaj Chaudhary, in a written reply in the Rajya Sabha, said the government annually sets Ground Level Credit (GLC) targets for agriculture and allied sectors, which banks are required to meet during each financial year. These targets are determined region-wise, agency-wise — including Scheduled Commercial Banks, Regional Rural Banks and Cooperative Banks — and category-wise for crop and term loans. Since 2021–22, dedicated credit targets have also been introduced for allied activities such as dairy, fisheries and animal husbandry.

As per Priority Sector Lending (PSL) guidelines issued by the Reserve Bank of India, banks are mandated to allocate at least 18% of their Adjusted Net Bank Credit or Credit Equivalent of Off-Balance Sheet Exposures to agriculture. Within this, a sub-target of 10% is earmarked for Small and Marginal Farmers. The guidelines also include incentive mechanisms for districts with lower credit flow and disincentives for districts with higher-than-average priority sector lending.

The government highlighted the role of the Kisan Credit Card scheme, which provides timely and affordable credit for agricultural inputs and crop-related expenses. Since 2019, the scheme has been expanded to include working capital requirements for animal husbandry, dairying and fisheries.

Under the Modified Interest Subvention Scheme, farmers can avail short-term agricultural loans at a concessional interest rate of 7% through Kisan Credit Cards. Those who repay loans promptly receive an additional 3% incentive, effectively reducing the interest burden to 4%.

To further ease credit access, the Reserve Bank of India has raised the collateral-free loan limit for short-term agricultural loans, including allied activities, from Rs 1.60 lakh to Rs 2 lakh per borrower with effect from January 1, 2025. This move is expected to benefit small and marginal farmers, who constitute over 86% of the agricultural sector.

The government, through National Bank for Agriculture and Rural Development (NABARD), also supports rural infrastructure development under the Rural Infrastructure Development Fund, which enhances credit absorption capacity in rural areas. NABARD additionally prepares district-level Potential Linked Credit Plans under the RBI’s Lead Bank Scheme to estimate priority sector credit potential, which helps the government set agriculture credit targets.

Financial support is also provided by NABARD to regional rural banks, cooperative banks, commercial banks and non-banking financial institutions to ensure adequate liquidity during crop sowing and harvesting seasons.

In the Union Budget 2025–26, the government also launched the PM Dhan Dhaanya Krishi Yojana to improve credit availability in districts with low agricultural credit disbursement.

Additionally, measures such as technology upgrades and institutional strengthening initiatives have been undertaken to enhance the efficiency of Rural Cooperative Banks and Regional Rural Banks that primarily serve rural and backward regions.