Government Launches ₹1,000 Crore Scheme to Ease Post-Harvest Credit for Farmers

The Indian government created the ₹1,000 crore Credit Guarantee Scheme (CGS) to make it easier for farmers to get loans after the harvest. The goal is to lower distressed sales and make the agricultural industry more financially stable.

The Credit Guarantee Scheme consists of important components

Corpus Fund: A ₹1,000 crore fund called the Corpus Fund has been set up to urge banks to lend more money to farmers.

Coverage for Loans: The plan backs loans of up to ₹75 lakh for small and marginal farmers and up to ₹2 crore for traders who don't work on farms.

Interest Rate Cap: Banks can only charge interest rates on these loans that are 3% more than the Marginal Cost of Funds-based Lending Rate (MCLR) per year.

Electronic Negotiable Warehouse Receipts (e-NWRs): The goal of the plan is to get banks to lend more money against electronic negotiable warehouse receipts (e-NWRs) issued by registered repositories with the Warehousing Development and Regulatory Authority (WDRA).

Goals and anticipated outcomes:

The main goal of the CGS is to keep farmers from having to sell their crops at low prices so they can get better prices for them and invest in future farming. By using e-NWRs, farmers can get post-harvest loans more quickly, which gives them the cash they need to meet their immediate financial needs without having to sell their crops at low prices.

Food Secretary Sanjeev Chopra talked about how post-harvest lending has a lot of room to grow. He said that current lending is only ₹40,000 crore, which is a small part of the total ₹21 lakh crore that is lent for agriculture, and that loan against e-NWRs is only ₹4,000 crore. With this plan, the government wants to raise post-harvest loans to 5.5 lakh crore over the next ten years.

Setting up and Providing Support

We think the plan will change the way agricultural credit works by making banks more willing to lend money to farmers. Union Minister Pralhad Joshi said that banks should be more flexible with farmers when it comes to paying back loans.

Also, we think that the new launch of the e-Kisan Upaj Nidhi platform will make the lending process easier, so farmers will only have to go to bankers once to get a loan. Additionally, efforts are underway to register more warehouses than the current 5,800, thereby expanding the user base for e-NWRs.

Conclusion

The ₹1,000 crore Credit Guarantee Scheme is a big step towards giving Farmers fmore power by giving them more financial freedom and lowering the need for distress sales. The program aims to improve access to post-harvest loans through e-NWRs and create a more favorable lending environment in order to support long-term growth and strengthen the agricultural sector's economic base.