Rishabh Sahu, A. K. Tripathi, Deepak Parganiha
College of Dairy Science and Food Technology, Raipur (C.G.)

With almost half of the workforce employed and a substantial GDP contribution, agriculture is the foundation of the Indian economy. However, timely and sufficient financial resources are necessary for the sector's growth and productivity. In order to meet this need, the Indian agricultural credit system is essential, providing a range of financial services and products to aid farmers. This article gives our readers a thorough understanding of India's agricultural loan system by examining its structure, major actors, government initiatives, difficulties, and hopes for the future.

Structure of the Agricultural Credit System:
The multi-tiered network that makes up India's agricultural credit system was created to meet the various demands of farmers. The following are the main organisations that are part of this framework:

1. Commercial Banks (CBs)
Following the Reserve Bank of India's (RBI) directive to devote 18% of their Adjusted Net Bank Credit (ANBC) to agriculture, commercial banks are the main lenders to the agricultural sector. They help farmers buy seeds, fertiliser, equipment, and other necessities for agriculture by offering both short-term and long-term loans.

2. Regional Rural Banks (RRBs)
In particular, small and marginal farmers, agricultural labourers, and rural artisans were the target audience for RRBs when they were founded. RRBs function with the dual goals of social service and profitability under the supervision of the National Bank for Agriculture and Rural Development (NABARD).

3. Cooperative Credit Institutions
This system consists of Primary Agricultural Credit Societies (PACS), District Central Cooperative Banks (DCCBs), and State Cooperative Banks (SCBs). These organisations provide financing to farmers at the local level through a three-tiered structure, especially in rural areas where commercial banks are not as prevalent.

4. National Bank for Agriculture and Rural Development (NABARD)
As the premier development financial organisation, NABARD manages and supports RRBs, cooperative banks, and other rural financial institutions through refinances. It is essential to the rural credit ecosystem's capacity building and policymaking processes.

5. Microfinance Institutions (MFIs) and Self-Help Groups (SHGs)
Small-scale farmers and rural business owners are served by these organisations, who frequently offer financing without collateral. In areas that are underserved by traditional banking institutions, MFIs and SHGs aid in closing the credit gap.

Government Initiatives and Schemes:
The Government of India has introduced several initiatives to strengthen the agricultural credit system and improve credit accessibility for farmers:

1. Kisan Credit Card (KCC) Scheme: The KCC program was introduced in 1998 with the goal of giving farmers easy access to finance for farming and other purposes. It encourages financial inclusion with characteristics like low interest rates and flexible withdrawal alternatives.

2. Interest Subvention Scheme (ISS): This program encourages prompt loan repayment and lessens financial strain on farmers by providing short-term crop loans up to ₹3 lakh at subsidised interest rates.

3. Pradhan Mantri Fasal Bima Yojana (PMFBY): Despite being essentially a crop insurance program, PMFBY improves farmers' creditworthiness by reducing farming hazards.

4. Rural Infrastructure Development Fund (RIDF): RIDF, which is run by NABARD, is dedicated to building rural infrastructure, which indirectly helps agriculture by enhancing storage, transportation, and irrigation systems.

Challenges in the Agricultural Credit System:
Despite its robust structure, the agricultural credit system faces several challenges:

1. Access to Credit: Due to regulatory obstacles, a lack of collateral, and a lack of financial awareness, many small and marginal farmers have difficulty obtaining formal loans.

2. Regional Disparities: The allocation of credit is still unequal, with agriculturally developed states like Punjab and Haryana receiving more institutional credit than areas like eastern India.

3. Dependence on Informal Sources: Many farmers continue to rely on moneylenders in spite of initiatives to promote institutional credit, which can result in debt traps and exploitative tactics.

4. Overdue Loans and NPAs: Growing non-performing assets (NPAs) in the agriculture industry put pressure on financial institutions and affect their capacity to make effective loans.
Recent Trends and Developments

Recent years have witnessed significant developments in the agricultural credit landscape:

1. Digitization of Credit Processes: Financial institutions are leveraging technology to improve transparency and efficiency in the supply of loans by utilising platforms like as Direct Benefit Transfer (DBT) and Aadhar-enabled Payment Systems (AePS).

2. Increased Credit Flow: Over the last ten years, the disbursement of agricultural loans has increased significantly, with a compound annual growth rate (CAGR) of 15.17%.

3. Focus on Small and Marginal Farmers: Since smallholders make up more than 85% of India's farming population, the government and financial institutions are focussing on specific programs to assist them.
Future Outlook

To further strengthen the agricultural credit system, several measures are needed:

1. Enhanced Financial Inclusion: Credit accessibility in rural areas can be enhanced by increasing banking presence and fostering financial awareness.

2. Innovative Financing Models: Risks can be reduced and more farmers can be drawn to institutional lending by implementing models like weather-indexed insurance and warehouse receipt financing.

3. Focus on Technology: Reliance on unofficial credit sources can be decreased by streamlining credit procedures through the use of fintech and mobile banking.

4. Policy Support: To maintain industry growth, the government must continue to prioritise agricultural lending through targeted subsidies and refinancing programs.

Conclusion
For millions of farmers in India, the agricultural loan system is a lifeline that helps them maintain and expand their businesses. Even though obstacles still exist, a more inclusive and effective finance ecosystem could be achieved by a combination of institutional support, government measures, and technical improvements. In addition to being essential for agricultural development, strengthening this system is also essential for India's economic advancement.