Agricultural Credit & Indebtedness

Half of agricultural households are in debt, and a fifth of their loans come from moneylenders

NSO's 2019 survey found 50.2 per cent of agricultural households in debt, with an average outstanding loan of ₹74,121. Institutional sources — banks, cooperative societies and government — accounted for 69.6 per cent of outstanding loans, while agricultural and professional moneylenders accounted for 20.5 per cent. Evidence confidence: High for 2019.

1 sub-problem

Farm credit is concentrated in some states while eastern, central and north-eastern states receive little

The RBI working group found that some states received as much as 10 per cent of total agricultural credit and others as little as 0.5 per cent; that credit in Bihar, Chhattisgarh, Jharkhand and West Bengal was not proportionate to their share of agricultural output; and that states in the central, eastern and north-eastern regions received very low agricultural credit relative to their agricultural GDP. It also noted that some states received credit exceeding their agricultural GDP, indicating possible diversion to non-agricultural purposes. Evidence confidence: Medium — the analysis dates from 2019.

Operative Kisan Credit Cards covered fewer than half of farm holdings

The RBI working group counted about 66.2 million operative Kisan Credit Cards in 2019 against roughly 145 million operational holdings — coverage of about 45 per cent, and possibly lower because some farmers hold more than one card. In Tamil Nadu, Andhra Pradesh, Kerala and Karnataka, 71 per cent of crop loans were disbursed outside the KCC. Evidence confidence: Medium — dated 2019; current coverage is not established here.

Livestock, fisheries and forestry get about a tenth of farm credit while producing about two-fifths of output

The RBI working group found that crop loans accounted for more than 90 per cent of agricultural credit though crops contributed about 60 per cent of output, leaving allied activities — livestock, forestry and fisheries — about 10 per cent of credit for about 40 per cent of output. It attributed part of this to banks insisting on land records from borrowers, since a farmer is defined by landholding. Evidence confidence: Medium — dated 2019.

Farm loan waivers have weakened repayment, according to the RBI's working group

The RBI's 2019 Internal Working Group reported that loan waivers announced by state governments affected the credit culture, with many borrowers withholding repayment in anticipation of a waiver, and recorded gross non-performing assets of 8.44 per cent in agricultural lending as on 31 March 2019. Waivers are a state policy choice and their net effect on farm distress is contested; this entry records the working group's finding rather than a settled conclusion. Evidence confidence: Medium.