Old lending practices a constraint in catering to agri sector: RBI dy guv

He highlighted that institutional credit to agriculture reached an all-time high of Rs 25.10 trillion during FY24

Since traditional lending practices have limitations in catering to the needs of the agriculture sector, innovative financial solutions that are flexible and tailored to the specific needs of the farmers are necessary, Swaminathan J, deputy governor, Reserve Bank of India said on Monday.

“Without accessible and affordable financing options, the much-needed shift to sustainable farming practices will remain a distant dream for many,” Swaminathan said at the International Research Conference.

Additionally, he said that going forward, two critical issues must be addressed- promoting sustainable agriculture and ensuring adequate funding for it.

He added that sustainable finance should not only promote environment-friendly practices, but also ensure that financial resources are available to the farmers who need them the most, providing equitable access to tools, technology, and knowledge.

Additionally, crop insurance products that cover weather-related risks can help mitigate the uncertainties farmers face, he said.

“…blended finance models — where public funds are used to leverage private investments— can be instrumental in providing the necessary capital for sustainable transitions. This would not only mobilise resources from multiple sources, but also distribute the risks and returns more equitably,” he said.

Swaminathan highlighted that institutional credit to agriculture reached an all-time high of Rs 25.10 trillion during FY24. Approximately, 74 million active Kisan Credit Cards have emerged as vital tools for providing timely and flexible credit, especially for short-term needs.

“However, addressing regional disparities in access to credit remains critical,” he said, adding that if it is ensured that all farmers, irrespective of their location, have access to adequate and timely financing, we will be better positioned to address the challenges of sustainability and resilience in agriculture.

Meanwhile, he also underscored that sustainable practices like organic farming, climate-smart technologies, and modern irrigation systems may seem costly upfront, but they offer long-term benefits by improving productivity, resilience, and environmental stewardship.

Institutional credit has grown significantly, but regional disparities persist. Value chain financing and warehouse financing offer potential solutions, while government initiatives like the Agri Infrastructure Fund, Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme (PMFME), and (Animal Husbandry Infrastructure Development Fund) AHIDF are helping drive agricultural growth, he said, adding that a concerted focus on addressing regional imbalances, enhancing credit access, and integrating value chain financing is crucial for a more sustainable and resilient future for Indian agriculture.