Credit and Loan Subsidies for Indian Farmers: Agriculture Financial Support from Indian Government

In India, Credit and Loan Subsidies play a pivotal role in supporting the agricultural community, especially farmers. These subsidies alleviate financial burdens by providing accessible credit and loans at reduced interest rates. Designed to enhance farmers’ economic well-being, these initiatives foster agricultural growth, ensuring sustainable development in rural areas. By easing financial constraints, the government empowers farmers to invest in modern farming practices, equipment, and seeds, ultimately contributing to the overall prosperity of the agricultural sector.

Credit and Loan Subsidies for Indian Farmers

Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)

Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) is a transformative initiative by the Indian government, offering vital financial support to small and marginal farmers. Launched on December 1, 2018, and officially inaugurated on Feb 24, 2019, by Narendra Modi, the scheme provides an annual income support of up to Rs 6,000 per eligible farmer.

As a Central Sector program, PM-Kisan receives complete funding from the Government of India to enhance farmers’ economic stability across the nation. This direct income transfer empowers farmers, fostering agricultural growth and ensuring a more secure livelihood for rural communities.

Kisan Credit Card (KCC) Scheme

The Kisan Credit Card (KCC) scheme, initiated in 1998, revolutionizes farmers’ access to credit. It facilitates easy procurement of agricultural necessities like seeds and fertilizers while providing cash for production requirements. Originally focused on agriculture, the scheme expanded in 2004 to include credit for allied and non-farm activities.

In 2012, a simplification initiative led by Shri T. M. Bhasin, CMD of Indian Bank, resulted in Electronic Kisan Credit Cards. This scheme, guided by overarching principles, allows flexibility for implementing banks to customize approaches, ensuring tailored financial support for farmers across diverse needs and regions.

Interest Subvention Scheme for Short-Term Crop Loans

The Interest Subvention Scheme is Short-Term Crop loan scheme by the Central Government that benefits farmers with loans up to Rs. 3 lakhs for one year. Farmers enjoy concessional crop loans at a 7% interest rate, with an additional 3% subvention for prompt repayment within a year.

This effectively reduces the interest to 4% per annum for loans repaid on time. However, delayed repayments still qualify for a 2% interest subvention. The scheme covers credit needs for crop cultivation and post-harvest components under the Short-Term limit of Kisan Credit Card, excluding expenses unrelated to farming.

National Bank for Agriculture and Rural Development Loan Schemes

NABARD offers diverse loan schemes empowering Indian farmers. Tailored for agricultural growth, these schemes cover crop cultivation, livestock, and rural infrastructure. NABARD’s initiatives aim to enhance financial inclusion, providing accessible and affordable credit to farmers and fostering sustainable rural development. These schemes boost rural India’s agricultural productivity, livelihoods, and overall economic well-being.

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Farmer on A Tractor Making Rows on A Farm Field

Rashtriya Krishi Vikas Yojana (RKVY)

Launched in 2007, Rashtriya Krishi Vikas Yojana (RKVY) aimed at 4% annual agricultural growth. Running until 2019-20 with a budget of Rs 15,722 crore, RKVY addressed slow agricultural growth. The scheme prioritized flexibility for states, encouraging tailored planning through the State Agriculture Plan (SAP) and District Agriculture Plans (DAPs).

These plans aligned with agro-climatic conditions and local needs, fostering decentralized strategies. RKVY, including the RAFTAAR initiative, emphasized incentivizing agricultural and allied sector investments, striving to boost overall agricultural productivity and address specific challenges faced by farmers in different regions.

Agricultural Debt Waiver and Debt Relief Scheme

ADWDRS, by the Government of India, aims to assist farmers through agricultural loans financially. It covers short-term production and Investment Loans, benefiting marginal, small, and other farmers. Debt Waiver signifies 100% relief, while Debt Relief is 25%. Marginal/small farmers receive a full waiver, while others get a 25% rebate, contingent on paying the remaining 75%. Certificates issued post-waiver or settlement detail the eligible amount. The scheme, administered by lending institutions, ensures farmers receive the intended financial support while adhering to specified conditions and acknowledgments.

Mudra Yojana for Farmers

Pradhan Mantri Mudra Yojana (PMMY) empowers non-farm sector entrepreneurs with up to Rs. 10 lakh microcredit. It aids income-generating manufacturing, trading, and services activities, including agriculture-related ventures. The scheme encompasses small enterprises like manufacturing units, service providers, and various businesses.

Eligible Member Lending Institutions (MLIs) include banks, cooperative banks, MFIs, NBFCs, and others. Interest rates are per RBI guidelines, with waived upfront fees for Shishu loans up to Rs. 50,000. The scheme, categorized into Shishu, Kishore, and Tarun, caters to varying funding needs, promoting financial inclusivity and entrepreneurship in diverse sectors.

Warehouse Infrastructure Fund

Established in 2013-14 with a Rs. 5,000 crore corpus, the Warehouse Infrastructure Fund (WIF) by the Government of India, managed by NABARD, supports scientific warehousing for agricultural commodities. An additional Rs. 5,000 crore was allocated in 2014-15. As of March 31, 2023, disbursements reached Rs. 8,674 crore. The fund aims to enhance storage capabilities, ensuring efficient preservation and distribution of agricultural produce, contributing to the overall development of the agricultural infrastructure in the country.

Cooperative Credit Structure

In India, the Cooperative Credit Structure operates as a three-tier system. At the grassroots are Primary Credit Societies, followed by Central Cooperative Banks at the district level and State Cooperative Banks at the state level. These member-owned financial cooperatives facilitate thrift, credit, and various financial services.

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The Reserve Bank of India supports them through NABARD, integrating the cooperative structure into the national banking system. Primary Agricultural Credit Societies form the foundation, Central Cooperative Banks act as district federations, and State Cooperative Banks serve as apex institutions, fostering financial inclusion and collaboration between cooperative and joint-stock banks.

Agricultural Marketing Infrastructure (AMI) Fund

The Agricultural Marketing Infrastructure (AMI) Fund aims to enhance farmers’ income by adding value and processing at their level. Executed by the Ministry of Agriculture & Farmers Welfare, it provides subsidies for creating storage and other marketing infrastructure projects. The scheme, continuing until March 31, 2026, offers financial support to individuals, farmers, FPOs, cooperatives, and state agencies.

Subsidies range from 25% in plain areas to 33.33% in specific regions. AMI promotes competitive marketing channels, reduces post-harvest losses, and facilitates farmer-consumer linkages, fostering a resilient and remunerative agricultural ecosystem.

Frequently Asked Questions (FAQ) on Credit and Loan Subsidies for Indian Farmers

What is PM-KISAN, and How Does it Support Farmers?

PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) is a transformative initiative providing financial support to small and marginal farmers. Launched in 2018, it offers an annual income support of up to Rs 6,000 per eligible farmer, directly empowering them and fostering agricultural growth.

How Has the Kisan Credit Card (KCC) Scheme Evolved Since Its Initiation In 1998?

KCC revolutionized farmers’ access to credit, enabling easy procurement of agricultural necessities. Expanded in 2004 to cover allied and non-farm activities, it underwent simplification in 2012 with Electronic Kisan Credit Cards, ensuring tailored financial support.

What Benefits Does the Interest Subvention Scheme for Short-Term Crop Loans Provide?

The scheme offers concessional crop loans at a 7% interest rate, with an additional 3% subvention for prompt repayment. This effectively reduces the interest to 4% per annum, promoting timely repayments and supporting credit needs for crop cultivation.

How Does NABARD Contribute to Indian Agriculture Through Its Loan Schemes?

NABARD offers diverse loan schemes covering crop cultivation, livestock, and rural infrastructure. Aimed at enhancing financial inclusion, these initiatives provide accessible and affordable credit, fostering sustainable rural development and boosting overall economic well-being.

What is the Objective of the Agricultural Marketing Infrastructure (AMI) Fund?

The AMI Fund aims to enhance farmers’ income by adding value and processing at their level. Executed by the Ministry of Agriculture & Farmers Welfare, it provides subsidies for creating storage and other marketing infrastructure projects, promoting competitive marketing channels and reducing post-harvest losses.

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Conclusion

Credit and loan subsidies are crucial for India’s agricultural development, providing financial support to farmers through initiatives like PM-KISAN, KCC, Interest Subvention Scheme, NABARD’s loan schemes, RKVY, AMI Fund, ADWDRS, Mudra Yojana, and Cooperative Credit Structure.

Credit and Loan Subsidies for Indian Farmers: Agriculture Financial Support from Indian Government