Agricultural credit in India: A conceptual study of its effectiveness

Abstract

Objective of this report is to present an analysis of agricultural credit policies of India. Credit availability to farmers plays a very significant role in productivity of agriculture and rural development. With the aim of timely and adequate credit flow to agriculture, both Indian government as well as RBI has taken various measures such as priority sector lending program in 1969, introduction of credit card scheme – KCC in 1998, restructuring of cooperative credit in 2004, implementation of national agriculture insurance scheme (NAIS) etc. Despite all these efforts the results have not been satisfactory. Benefit of schemes reaching to the small & poor farmers is one of the biggest concerns. Moreover Agricultural loan overdue and nonrepayments have been chronically high. Government had to launch agriculture debt waiver and debt relief scheme in 2008, which was severely criticized by many groups. All these concerns are demanding an innovative shift in agriculture credit policy of India. The study is completely based on secondary research and the most of the data has been sourced from various reports published by Reserve Bank of India. A brief history of agricultural credit policy since independence of India has been analyzed but the study is focused more towards the status of credit availability to farmers in the last decade. The report also discusses the various credit disbursement channels used by government and highlights their performances in recent years. Subsequently an attempt has been made to enquire into various challenges faced by the current system.