The farm credit target is likely to be raised by a whopping Rs 1 trillion (Rs 1 lakh crore) to a record Rs 11 trillion (Rs 11 lakh crore) in the Budget 2018-19 to improve credit flow in the agriculture sector, according to sources.
In the current financial year, the government has kept a credit target of Rs 10 trillion (Rs 10 lakh crore). Of which, Rs 6.25 trillion (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 trillion (Rs 11 lakh crore) for the next financial year," 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 per cent. 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 per cent interest subsidy to ensure farmers get short-term farm loan of up to Rs 3 lakh at an effective rate of 7 per cent per annum.
An additional incentive of 3 per cent is being given to farmers for prompt repayment of loans within due date, making an effective interest rate for them at 4 per cent.
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.