The general budget has raised the target for mandatory loans to farmers by Rs 50,000 crore at Rs 8.5 lakh crore, while promising to infuse nearly Rs 1 lakh crore to various rural banking corporations to finance projects in the rural economy.
Together, the infusions maintain India’s aggressive farm credit policies that put soft cash into stressed farmhands. Farmers depend on loans to meet cultivation costs, such as seeds and manures, apart from machinery. Finance minister Arun Jaitley has maintained a cheaper rate of interest for those who make timely repayment.
Interest on agricultural credit, brought down to 7% from the standard rate of 9%, continues. Those making timely payments will get farm loans at 4%.
“Farm credit underpins the efforts of our farmers and I have, therefore, set up an ambitious target of Rs 8.5 lakh crore,” Jaitley said, while presenting the budget.
Two-thirds of Indians rely on farm income, most of them have meagre incomes. Jaitley said agricultural credit would focus on ‘small and marginal farmers’ or those owning a hectare or less.
Jaitley said he proposed to allocate ‘Rs 25,000 crore in 2015-16 to the corpus of Rural Infrastructure Development Fund set up NABARD’.
He also announced an allocation of Rs 15,000 crore for long term rural credit fund, Rs 45,000 crore for short term cooperative rural credit refinance fund and Rs 15,000 crore for short term RRB (regional rural banks) refinance fund.