The farm credit goal is likely to be raised by about 10 percent to a record Rs 12 lakh crores in the 2019-20 Budget to be presented on February 1, according to sources.
For the present fiscal, the government has set a credit target of Rs 11 lakh crores.
“The government has been increasing the credit goal for the farm sector every year. This time too, the target is likely to be increased by around 10 percent or Rs 1 lakh crore to Rs 12 lakh crores for 2019-20 fiscal,” the sources said.
The agricultural credit flow has increased consistently over the years, exceeding the aim set for each fiscal. For instance, credit worth Rs 11.68 lakh crores were given to farmers in 2017-18, much higher than the Rs 10 lakh crores target set for that year, they added.
Similarly, crop loans worth Rs 10.66 lakh crores were disbursed in the 2016-17 fiscal, higher than the credit aim of Rs 9 lakh crores.
Credit is a critical input in achieving higher farm output. Institutional credit will also help delink farmers from non-institutional sources where they are compelled to borrow at usurious rates of interest, the sources added.
Normally, farm loans attract an interest rate of 9 percent. However, the government has been giving interest subvention to make available short-term farm credit at an affordable rate and help boost farm output.
The government is giving 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, creating the effective interest rate 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 refinancing RRBs and cooperative banks.