According to sources, farm credit target is likely to be increased by about 10 % to a record Rs 12 lakh crore in the upcoming budget 2019-20, which will be presented on 1st February.
For the current financial year, the government has fixed a credit target of Rs 11 lakh crore.
Sources said, "The Cabinet has been increasing the credit target for the agriculture sector every year. And this time also, the target is likely to be raised by around 10 % or Rs 1 lakh crore to Rs 12 lakh crore for the 2019-20 fiscal".
They further said that the farming credit flow has been increased consistently over the years, surpassing the target set for every fiscal. Take for example, credit worth Rs 11.68 lakh crore was provided to farmers in 2017-18, which was much higher than the Rs 10 lakh crore target fixed for that year.
In the same way, crop loans worth Rs 10.66 lakh crore were distributed in the year 2016-17, which were higher than the credit target of Rs 9 lakh crore.
The sources said that credit is an important input in attaining higher farm output. Institutional credit will also help in delinking cultivators from non-institutional sources where they are forced to borrow at usurious rates of interest.
Usually, farm loans draw an interest rate of 9 %. But, the government has been offering interest funding to make available short-term farm credit at a reasonable rate and help increase farm output.
The government also provides 2 % interest subsidy to make sure that farmers get short-term farm loan of up to Rs 3 lakh at an effectual rate of 7 % per year.
An extra incentive of 3 % is offered to farmers for timely repayment of loans in due date, making the effective interest rate 4 %.
The interest subvention is provided to public sector banks (PSBs), regional rural banks (RRBs), cooperative banks and private lenders on use of own funds and to the NABARD for refinancing RRBs and cooperative banks.
