1. Meaning of Agricultural Credit:
Agricultural credit encompasses the financial services and loan products made accessible to farmers and stakeholders involved in agriculture. These credits enable farmers to procure essential inputs such as seeds, fertilizers, pesticides, irrigation systems, labor, and mechanized tools required for crop production. As farming becomes increasingly commercial and input-intensive, the availability of timely and sufficient credit has become a critical component for improving agricultural productivity, ensuring sustainability, and reducing reliance on informal credit sources such as moneylenders.
Agricultural credit refers to any short-term, medium-term, or long-term financial assistance provided to individuals or organizations involved in agriculture and allied sectors. It includes both institutional and non-institutional sources of lending and is aimed at supporting capital formation, productivity enhancement, and income generation through farming activities. This form of credit supports both production-related needs and consumption requirements, contributing directly to rural development.
3. Need for Agricultural Credit:
- Financing seasonal agricultural operations like land preparation, sowing, fertilizing, and weeding.
- Procuring quality seeds, fertilizers, agrochemicals, and other critical inputs.
- Investing in irrigation infrastructure such as tubewells, drip and sprinkler systems.
- Facilitating mechanization through the purchase of tractors, threshers, and other farm machinery.
- Supporting allied agricultural activities such as dairy, poultry, fisheries, apiculture, and sericulture.
- Providing financial relief in times of crop failure, natural disasters, or market volatility.
- Enabling efficient post-harvest handling, including storage, processing, and marketing.
- Promoting rural employment, poverty reduction, and inclusive economic development.
4. Classification of Agricultural Credit:
A. Based on Purpose:
- Production Credit: For seasonal inputs like seeds, fertilizers, and labor.
- Investment Credit: For acquiring long-term assets like machinery, irrigation systems, or orchards.
- Marketing Credit: Helps farmers hold produce to sell at better prices.
- Consumption Credit: For household needs like healthcare, education, or social events.
B. Based on Duration:
- Short-Term Loans: 6 to 15 months; used for recurring seasonal expenses.
- Medium-Term Loans: 1.5 to 5 years; used for livestock purchase, wells, etc.
- Long-Term Loans: More than 5 years; for land improvement, mechanization, etc.
C. Based on Security:
- Secured Loans: Backed by collateral like land or property.
- Unsecured Loans: No collateral; based on credit history or group guarantees.
5. Characteristics of Good Agricultural Credit:
- Adequacy: Should fully meet the financial requirements of farming activities.
- Timeliness: Credit must be disbursed during critical stages of the cropping cycle.
- Affordability: Reasonable interest rates, especially for smallholders.
- Accessibility: Available even in remote or marginalized areas.
- Repayment Capacity Alignment: Terms should match income and crop cycles.
- Flexibility: Responsive to weather and market-related changes.
- Transparency: Clear terms and conditions to avoid exploitation.
- Sustainability: Should encourage responsible borrowing and reinvestment.
6. Recent Developments in Agricultural Credit in India:
- Kisan Credit Card (KCC): Simplified short-term loan system with insurance and debit card features.
- Interest Subvention Scheme (ISS): 2–3% subsidy on short-term crop loans for timely repayment.
- Broadened Credit Scope: Includes dairy, poultry, fisheries, and agro-processing sectors.
- Digitization of Lending: e-KCC and Jan Samarth Portal enable quick, paperless disbursal.
- Agriculture Infrastructure Fund (AIF): Supports infrastructure like cold storage and processing units.
- Priority Sector Lending (PSL): RBI mandates banks to allocate a fixed portion of credit to agriculture.
- NBFCs and MFIs: Expand outreach in underserved rural regions with tailored credit solutions.
- Credit Guarantee Schemes: Help farmers access loans without collateral by reducing lender risk.
Agricultural credit is fundamental for fostering food security, technological adoption, and sustainable rural development. With shifting climatic patterns, market unpredictability, and evolving agricultural practices, a modern and inclusive credit delivery system is crucial for ensuring the long-term viability of the agricultural sector in India.