'Credit is essentially the lifeblood of any financial system': NABARD DGM Prakash Kumar Mishra on why farmers need easier access to loans

Access to affordable and timely credit remains a key issue for farmers, with problems ranging from limited funds with smaller banks to the lack of collateral and reliable farmer data. NABARD is working with banks and rural institutions to address these gaps and ensure that credit reaches farmers based on their needs, Prakash Kumar Mishra, DGM, NABARD, said at the Bharat Agriculture Conclave 2026 on Wednesday.

In the session discussing ‘Khet, Kamai Aur Karz’, Mishra said NABARD is involved in the agriculture credit system from planning to implementation. He said the institution works across different aspects of agriculture and plays a role in ensuring that financial institutions have enough resources to lend to farmers.

“NABARD is a such institution under the Government of India that works on farmers and every aspect connected to them. There is hardly any area related to agriculture where NABARD does not have a role,” Mishra said.

On the importance of credit, he said, “Credit is essentially the lifeblood of any financial system. If there is a shortage of it, the system will suffer.” NABARD, he said, works to ensure that money continues to reach farmers regularly through different financial institutions.

Why smaller banks need NABARD’s support

One of the issues is that smaller banks may not always have enough capital to lend to farmers. NABARD helps address this by providing resources to such banks, Mishra said.

“If we leave aside the large banks, smaller banks often face a shortage of resources. They may not have enough capital to provide loans. NABARD works to provide capital to these banks and does so on a very large scale,” he said.

The cost of borrowing is another issue for farmers. Mishra pointed to the government's interest subvention support, under which farmers can get KCC loans at 7%.

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“We have heard that car loans are cheaper while farmers' loans are more expensive. NABARD also works on this issue with the support of the Government of India,” he said.

How farmers can get loans at around 4%

Mishra said the interest support provided by the government helps reduce the effective cost of agricultural credit. The government reimburses banks for the loss arising from the interest support through NABARD.

“The Government of India provides interest subvention on loans to farmers. Under the KCC, farmers are ensured access to loans at 7% and the banks are compensated for the loss through NABARD, with funds provided by the Government of India,” he said.

There is also a 3% prompt repayment incentive for farmers who repay their loans on time. This is routed through NABARD to banks and ultimately benefits farmers.

“For this, the Government of India provides a 3% prompt repayment incentive. This is also routed through NABARD to the banks and ultimately reaches the farmers. So, effectively, agricultural loans become available to farmers at around 4%,” Mishra said.

“This helps reduce the problem of expensive credit,” he added.

Collateral, data remain challenges

Apart from the cost of credit, farmers can also struggle to provide collateral when applying for loans. NABARD has developed the Joint Liability Group (JLG) model to help address this issue.

“The second issue is the problem of collateral. If a farmer does not have collateral, how can this issue be addressed? NABARD has developed the JLG model for this,” Mishra said.

Mishra also pointed to the lack of reliable farmer data as another challenge for banks. NABARD has been working on digitisation to help address the gap.

“Similarly, banks often do not have reliable data when it comes to providing loans. NABARD has also worked on digitisation to address this issue,” he said.

He added that NABARD is also working to strengthen cooperative and rural institutions so that farmers who do not have collateral or easy access to banks can get better access to formal credit.

“If a farmer does not have collateral, or if farmers do not have adequate access to banks, NABARD is also working to strengthen various cooperative and rural institutions,” Mishra said.