Agricultural credit from commercial and regional rural banks is projected to reach a record Rs 32.5 lakh crore in FY26, driven by formalisation of rural lending and rising demand, according to Nabard. Banks have already disbursed Rs 14.51 lakh crore in farm loans during the first half of the fiscal year.
Key Takeaways
- Agricultural credit target set at Rs 32.5 lakh crore for FY26
- Banks disbursed Rs 14.51 lakh crore in H1 FY26
- Southern states receive disproportionate credit share despite smaller cropped area
- 77.1 million active Kisan Credit Cards with subsidized interest rates
Credit Distribution and Regional Disparities
Financial institutions are expected to meet the Rs 32.5 lakh crore agriculture credit target for 2025-26. In the previous fiscal year, banks extended Rs 28.69 lakh crore, with approximately 60% allocated to short-term crop loans and the remainder to investment credit.
Despite consistent double-digit growth over the past decade, credit distribution shows significant regional imbalances. Southern states received 48% of agricultural loans in FY25 despite accounting for only 17% of the country’s gross cropped area.
Addressing Credit Flow Gaps
Nabard analysis attributes regional disparities to weak rural financial infrastructure and lower credit absorption capacity due to financial literacy gaps. The institution is enhancing focus on productivity improvements and agri-value-chain financing to bridge these gaps.
Nabard plans to leverage existing frameworks including the SHG-Bank Linkage Programme, Joint Liability Groups, and farmer-producer organizations to improve credit access in underserved regions.
Kisan Credit Cards and Subsidy Schemes
In FY25, approximately 55% of agricultural credit went to short-term crop loans, including Rs 6.5-7 lakh crore disbursed through Kisan Credit Cards. Commercial banks dominate agricultural lending, accounting for over 75% of total disbursals.
Under the Modified Interest Subvention Scheme, KCC holders can access loans up to Rs 3 lakh at 7% interest for working capital, with prompt repayment reducing the effective rate to 4%. Currently, 77.1 million KCCs are active, including specialized cards for fisheries and animal husbandry.
For allied activities beyond crop cultivation, the short-term loan limit is capped at Rs 2 lakh. The scheme disbursed Rs 17,811 crore in FY25.
District-Level Planning
To address regional credit gaps, Nabard prepared 782 district-level Potential Linked Credit Plans in FY25. The institution continues to implement annual district-wise PLPs to direct institutional credit toward priority sectors, including crop loans and term finance for agriculture and allied activities.
