Agricultural finance is essential for various agricultural activities, involving a credit ecosystem consisting of ministries and institutions.
Aspects/Purposes of Agricultural Finance
Purchase of Inputs: Seeds, fertilizers, labor.
Irrigation & Water Management: Wells, irrigation systems.
Farm Mechanisation: Tractors, harvesters.
Land Development: Soil reclamation, drainage.
Crop Production Expenses: Labor wages, harvesting.
Storage & Marketing: Farm storage and transport.
Allied Activities: Dairy, poultry, fisheries.
Horticulture & Plantation: Fruits, floriculture.
Infrastructure: Warehouses and processing units.
Emergency Needs: Family consumption, health.
Repayment of Debts: Refinancing loans.
Modern Technology Adoption: Greenhouse, precision agriculture.
Sources of Agricultural Finance
Non-Institutional: Informal credit (~40% of rural finance), high interest. Sources include moneylenders, relatives.
Institutional: Government ministries and institutions, banks, and cooperatives.
Trends in Credit Distribution
Institutional credit accounts for ~72% of total credit, with a notable growth from ₹8 lakh crore in FY15 to over ₹27.5 lakh crore in FY25.
Successful Schemes
Kisan Credit Card (KCC): Major short-term credit source since 1998.
Modified Interest Subvention Scheme (MISS): Encourages repayments for KCC.
Agriculture Infrastructure Fund (AIF): Supports long-term infrastructure investments.
Conclusion
The agricultural finance sector shows a shift from informal to formal credit sources, with ongoing reforms needed to address disparities and repayment issues.