Union Budget 2021: Centre likely to hike farm credit target to about Rs 19 lakh crore

Representational image. Reuters

New Delhi: With the aim of doubling farmers’ income by 2022, the government is likely to raise farm credit target to about Rs 19 lakh crore in Budget 2021-22 to be presented on 1 February, according to sources.

For the current fiscal, the government has set a farm credit target of Rs 15 lakh crore.

The government has been increasing the credit target for the farm sector every year and this time too, the target is likely to be increased to around Rs 19 lakh crore for the 2021-22, sources said.

“Non-banking finance companies (NBFCs) and co-operatives are active in the agriculture credit space. The Nabard refinance scheme will be further expanded. Agriculture credit target for the year 2020-21 has been set up at Rs 15 lakh crore,” Finance Minister Nirmala Sitharaman had said while announcing the Budget 2020-21.

The agricultural credit flow has increased consistently over the years, exceeding the target set for each fiscal. For instance, credit worth Rs 11.68 lakh crore was given to farmers in 2017-18, much higher than the Rs 10 lakh crore target set for that year, they added.

Similarly, crop loans worth Rs 10.66 lakh crore were disbursed in the 2016-17 fiscal, higher than the credit target of Rs 9 lakh crore.

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 said.

Normally, farm loans attract an interest rate of 9 percent. However, 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 a 2 percent interest subsidy to ensure that farmers get short-term farm loans 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, making 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.