The government is likely to increase farm credit target to around Rs 18 lakh crore in the Budget 2022-23, which will be presented on February 1, in order to boost the agriculture sector. The government has set a credit goal of Rs 16.5 lakh crore for the current fiscal year.
The government has been increasing the loan target for the agricultural sector every year, and the aim for 2022-23 is expected to be hiked to Rs 18-18.5 lakh crore, according to sources.
The final amount will be decided in the last week of the month at the time of finalizing the budget 2022.
Annual farm credit targets, including crop loan targets for the banking industry, are set by the government. The flow of agricultural credit has risen steadily throughout the years, exceeding the annual target set for each fiscal year. In 2017-18, for example, farmers received loans worth Rs 11.68 lakh crore, substantially above the Rs 10 lakh crore set for that year.
In the same way, crop loans of Rs 10.66 lakh crore were disbursed in 2016-17, exceeding the credit target of Rs 9 lakh crore.
Agriculture Credit is Crucial for increasing the Farm Output:
Credit is a crucial component in increasing farm output. Institutional lending will also assist farmers break free from non-institutional sources where they are forced to borrow at exorbitant interest rates.
Normally, farm loans have a 9% interest rate. The government, on the other hand, has been offering interest subsidies to make short-term crop loans more accessible and to help improve farm productivity.
Farmers can acquire short-term farm loans of up to Rs 3 lakh at an effective rate of 7% per year thanks to a two percent interest subsidy from the government. Farmers will receive an additional 3% incentive if they repay their loans on time, bringing the effective interest rate to 4%.
The RBI has decided to increase the limit for collateral-free agriculture loans from Rs 1 lakh to Rs 1.6 lakh in order to increase the coverage of small and marginal farmers in the formal credit system.
On the use of their own money, public sector banks (PSBs), private lenders, cooperative banks, and regional rural banks (RRBs) receive interest subsidies, while NABARD refinances RRBs and cooperative banks.
