Agricultural Finance

Farmers need credit for two broad purposes: short-term/working capital needs (purchase of seeds, fertiliser, pesticides, payment of wages) and medium-to-long-term/fixed capital needs (land improvement, irrigation structures, farm machinery, purchase of livestock). Because farm income is seasonal and uncertain, access to timely and affordable credit is critical.

Sources of agricultural finance

1. Non-institutional sources: Village moneylenders, traders and commission agents, landlords, and relatives. Historically the dominant source, non-institutional credit is easy to access but often comes at very high rates of interest and can trap farmers in a cycle of debt.
2. Institutional sources: Cooperative credit institutions (Primary Agricultural Credit Societies and cooperative banks), Regional Rural Banks (RRBs), commercial banks, and the National Bank for Agriculture and Rural Development (NABARD), which was established in 1982 as the apex institution for refinancing and coordinating agricultural and rural credit. …