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The five southern states have a share of around 17% of the gross cropped area of the country.
Regional Disparities in Credit Flow
In FY25, National Bank for Agriculture and Rural Development (NABARD) had disbursed over Rs 28.69 lakh crore through commercial banks, cooperatives and regional rural banks. The share of commercial banks in disbursal of credit to the farm sector was Rs 23.22 lakh crore or over 80% of the agri-loans.
The farm credit flow to North-eastern states by commercial banks, regional rural banks and cooperative banks was only Rs 25,486 crore in 2024-25, about 1% of the total credit disbursement.
Other regions – north (14.9%), east (8.2%), central (13.7%) and west (14%) have a smaller share in the total agri loans disbursed. In terms of gross cropped area of the country these regions – north (20%), east (12%), central (28%) and western (17%) have much larger areas.
According to an analysis by NABARD, which provides refinance facilities to banks, the regional disparity in credit flow can be attributed to factors including weak rural financial institutional infrastructure and lower credit absorption due to low level financial literacy across states.
“Southern states have developed strong cooperative credit structures and states like Kerala, Tamil Nadu and Karnataka, have well established networks of cooperative banks, self-help groups and farmers producer organisations capable of effectively disbursing and sourcing funds,” a bank official told FE.
NABARD’s Plans and Policy Measures
In FY25, NABARD had prepared 782 district level potential linked credit plans to address regional disparity in credit flow.
Currently, the bank follows district-wise potential linked credit plans each year to boost the flow of institutional credit to priority sector activities such as crop loans and term loans for agricultural and allied enterprises.
A NABARD official had stated overall credit flow in the 2025-26 is likely to exceed Rs 32 lakh crore.
In FY25, out of which around 55% was towards short-term crop loans and the rest was towards investment loans in agriculture and allied sectors. Out of short-term loans around Rs 6.5 – Rs 7 lakh crore was disbursed to farmers with Kisan Credit Cards (KCCs).
The official had said there are discussions for providing special refinance terms for ‘aspirational districts,’ where rate of interest would be lower. There are also discussions to provide financial assistance to tenant farmers.
Earlier in year, Shaji KV, chairman, NABARD had stated that to address this imbalance in credit flow, the bank would use digitised credit record of farmers through Agri Stack, an initiative of the agriculture ministry, under which digital registry of farmers, village land maps and crop sown is being created. Shaji had stated that in the last 10 years, the average annual growth in the flow of agricultural credit has been in double digit at 13%.
Under the modified interest subvention scheme (MISS), of the agriculture ministry, farmers holding KCCs are provided loans of up to Rs 3 lakh at 7% interest per annum to meet working capital requirements. The scheme provides additional interest subvention of 3% for prompt repayment, reducing the effective rate of interest to 4%. In FY25, Rs 17,811 crore was disbursed under MISS.
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However, for 2025-26, the government has announced that the agri-credit limit is being enhanced to Rs 5 lakh annually. Sources said that enhancement in credit limit under KCC is yet to be operationalised.
MISS also includes post-harvest loans against negotiable warehouse receipts (NWRs) for small holders farmers with KCCs.
At present, there are 77.1 million operational KCC holders. This includes 1.24 lakh and 44.4 lakh KCCs issued to fisheries, poultry and animal husbandry activities, respectively.
If the short-term loan is taken for allied activities other than crop husbandry, the loan amount is limited to Rs.2 lakhs only.
From the beginning of the year, the collateral-free agricultural loan limits including loans for allied activities have been raised to RS 2 lakh.