Agriculture Loan Schemes in India: Empowering Agribusinesses for ‘Agrosuccess’

Agriculture has always been the backbone of India’s economy, providing livelihoods to millions of people and contributing significantly to the nation’s GDP. However, the sector faces numerous challenges, including unpredictable weather patterns, crop diseases, and the rising cost of inputs. To help farmers overcome these challenges and promote agricultural growth, the government of India has introduced several agriculture loan schemes. In this blog, we will explore some of the prominent agriculture loan schemes in India and their impact on the agricultural sector.

1. Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)

PM-KISAN is one of the flagship schemes of the Indian government aimed at providing financial assistance to small and marginal farmers. Under this scheme, eligible farmers receive a direct income support of Rs. 6,000 per year, paid in instalments. This financial support helps farmers meet their investment needs, buy better seeds, and improve their overall agricultural practices.

2. Kisan Credit Card (KCC)

The Kisan Credit Card scheme was introduced to provide timely and adequate credit to farmers for their short-term credit needs. Farmers holding KCCs can avail crop loans, working capital loans, and even term loans for agriculture-related activities. The scheme offers flexibility in repayment and interest rates, making it a valuable financial tool for farmers.

3. National Agricultural Insurance Scheme (NAIS)

NAIS aims to mitigate the financial risks faced by farmers due to crop failure, natural calamities, or other unforeseen events. Under this scheme, farmers can insure their crops at affordable premium rates, and they receive compensation in case of crop loss. NAIS helps farmers recover from losses and encourages them to take calculated risks in their agricultural practices.

4. Rashtriya Krishi Vikas Yojana (RKVY)

RKVY is a centrally sponsored scheme that focuses on the development of agriculture and allied sectors. It provides funds for various agricultural projects, including infrastructure development, research and development, and technology dissemination. RKVY plays a crucial role in enhancing agricultural productivity and income.

5. Interest Subvention Scheme for Short Term Crop Loans

This scheme offers interest rate subsidies to farmers who repay their short-term crop loans on time. Farmers who make timely repayments are eligible for an additional subsidy, effectively reducing the cost of credit. The Interest Subvention Scheme encourages prompt repayment and financial discipline among farmers.

Which Agricultural Loan Scheme Should One Choose?

If you are a farmer considering an agricultural loan, then use the following table to compare which loans you should get to address your agricultural needs:

Scheme	Eligibility	Benefit
PM-KISAN	All landholding farmers, including sharecroppers, having cultivable land up to 2 hectares	An annual cash transfer of Rs. 6,000 per eligible farmer, in three equal instalments of Rs. 2,000 each.
KCC	All eligible farmers	Credit limit of up to Rs. 3 lakh, at a concessional interest rate of 4%
NAIS	All farmers growing notified crops	Crop insurance cover up to 50% of the sum insured, with a maximum of Rs. 2 lakh per hectare
RKVY	All states and union territories	Financial assistance for a variety of schemes, such as irrigation, watershed development, crop diversification, and agricultural marketing
Interest Subvention Scheme for Short Term Crop Loans	All eligible farmers	Interest subsidy of up to 2% on short-term crop loans, subject to a maximum of Rs. 2 lakh per farmer per year

Agricultural Loan Schemes: Impact and Challenges

Agricultural loan schemes in India have been instrumental in supporting the farming community and fostering agricultural development. These schemes are designed to provide financial assistance to farmers, enhance productivity, and alleviate rural poverty. They have had the following effects on the Indian agricultural economy:

Improved Access to Credit:

One of the most significant impacts of agricultural loan schemes is the increased access to credit for farmers, especially small and marginal ones. These schemes offer affordable credit options, such as Kisan Credit Cards (KCCs), crop loans, and term loans. This improved access enables farmers to invest in their agricultural activities, purchase quality seeds, fertilisers, and machinery, and adopt modern farming techniques.

Enhanced Agricultural Productivity:

Agricultural loan schemes have played a crucial role in boosting agricultural productivity. With financial support readily available, farmers can afford better inputs, leading to increased crop yields. Additionally, they can invest in irrigation facilities and adopt sustainable farming practices, which further contribute to higher productivity.

Risk Mitigation:

Crop insurance schemes like the Pradhan Mantri Fasal Bima Yojana (PMFBY) provide farmers with protection against crop losses due to natural calamities, pests, or diseases. This risk mitigation aspect ensures that farmers do not suffer severe financial setbacks during adverse conditions, allowing them to continue farming with confidence.

Poverty Alleviation:

By enabling farmers to improve their agricultural output and income, these loan schemes contribute to poverty alleviation in rural areas. A higher income from farming helps improve the living standards of farming households, reducing their dependence on subsidies and government assistance.

Technology Adoption:

The availability of credit through these schemes encourages farmers to invest in modern agricultural technologies. This includes purchasing advanced machinery, employing mechanised farming techniques, and adopting precision agriculture methods. These technological advancements contribute to sustainable agriculture and increased yields.

Government’s agriculture loan schemes have had a significant impact on the lives of Indian farmers by improving access to credit has enabled farmers to invest in modern farming techniques, leading to increased agricultural productivity. However, there are still challenges to be addressed, such as:

The reach of these schemes needs to be extended to all farmers, including those in remote areas.
Awareness about the schemes and their benefits must be increased among farmers.
Streamlining the loan disbursal process and reducing bureaucratic hurdles is essential.

Conclusion

Agriculture loan schemes in India play a pivotal role in supporting farmers and promoting agricultural growth. These schemes not only provide financial assistance but also instil confidence in farmers to adopt innovative farming practices. To ensure the sustainable development of the agricultural sector, it is crucial for the government to continue refining these schemes, expanding their coverage, and addressing the challenges that farmers face. Empowering farmers through these schemes will not only boost agricultural production but also contribute to the overall economic growth and food security of India.

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.