Sowing the seeds of change for enhanced agricultural credit

However, the recent budgetary allocation of an additional INR 10,000 crore for the Rural Infrastructure Development Fund and additional INR 5000 core for the Micro-irrigation Fund corpus will go a long way in supplementing the banks for states majorly growing low-value crops. Moreover, a broader Operation Green scheme for 22 perishable products instead of just three (onions, potatoes, and tomatoes) is a step towards additional income. This would enhance farmers’ credit absorption capacity on a long-term basis for better financial inclusion.

Further, commercial banks providing agricultural credit could leverage the budgetary announcement of a 25% increase in Foreign Direct Investment (FDI) for the insurance segment. A likely rise in agri-sector insurance could provide the farmer with a better risk coverage and minimise additional expenditure. Moreover, a robust agribusiness plan could serve as an alternative to collaterals when approaching banks, thereby minimising even the banks’ probability of future asset risk. Additionally, RRBs could open more branches in credit-deprived regions, including North-Eastern states, enabling easier access to institutional loans for farmers.

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