The Centre has made lending norms easier in farmer support schemes like Kisan Credit Card to increase the quantum of funds lent by institutions to small and marginal farmers in the country.
These farmers account for over 90 percent of the people employed in agriculture and are vulnerable as a class. A government official told Hindustan Times that this move would reduce their dependence on informal moneylenders.
According to the revised guidelines, standard security requirements like hypothecation of crops do not apply to loans of up to Rs 1 lakh. This will also be applicable on loans taken through Kisan Credit Card, which helps land-holding farmers meet their immediate credit needs.
Under the Kisan Credit Card scheme, small farmers can also avail a 'flexible limit' of between Rs 10,000 and Rs 50,000 for their warehousing needs after the harvest season, and to set up small-scale agricultural businesses like dairies and poultry farms.
Branch managers, based on their assessment, now have the power to disburse this amount without relating it to the value of land owned by the farmer, the official said.
Farmers who have pending loans can now get extra credit of up to Rs 50,000 instantly without having to submit a ‘no dues’ certificate to the district authorities.
Investment and capital formation in the agricultural sector will help its growth. The Reserve Bank of India said in a report that a 10 percent increase in institutional credit helps in increasing a farmer's investment by around 3 percent. But there are also reports suggesting that farmers usually depend on private moneylenders for their credit needs.
Due to a decline in commodity prices and uneven distribution of rainfall, farmers' distress has grown. As a result, the NDA government has faced much criticism and protests have become a common occurrence.
The government aims to double farmers' income by 2022. The quantum of agricultural loans given to small farmers grew markedly between 2015 and 2017.
Economist Ramesh Manjunatha said that while these guidelines have been issued, there is a large chunk of farmers who do not get loans from institutional credit.
"Two classes of farmers, namely tenant farmers and sharecroppers are still largely excluded from institutional credit because they don’t own land titles. What we need is a change in the definition of farmers to include them. Right now, they are categorized as cultivators," Manjunatha said.