Demand for agricultural and rural credit is expected to remain strong in 2026-27, supported by higher input costs, wider Kisan Credit Card (KCC) coverage and increasing investments in allied activities, mechanisation and agricultural infrastructure, according to NABARD Deputy Managing Director Ajay Kumar Sood .
Credit disbursement triples in a decade
Speaking to ANI, Sood said farm credit disbursement has grown significantly over the past decade. In 2014-15, agricultural credit disbursement stood at around Rs 8.5 lakh crore, compared with approximately Rs 30 lakh crore in 2025-26 — a more than threefold increase .
“For 2026-27 also, demand will be very resilient, though it may be a more gradual pace of growth. Growth is basically happening because it is driven by higher input costs, enhanced KCC coverage and rising credit absorption in allied activities, mechanisation and agri-infrastructure,” Sood said .
Shift towards long-term investment credit
The structure of agricultural lending is gradually changing, with a greater focus on long-term investment credit rather than short-term crop loans .
“The composition of the credit itself is now evolving with a greater emphasis on investment-led term lending, which is reflecting a gradual shift from a short-term crop loan towards more capital formation in agriculture,” Sood said . He added that the shift would improve the sector’s ability to absorb credit and support long-term growth .
Rising borrowing costs a challenge
At the same time, Sood cautioned that rising borrowing costs remain a challenge for farmers and other rural borrowers .
“The farming community operates on a very thin margin, maybe 5-10 per cent. So even if there is a 100 basis point increase in interest rates, it can significantly erode their profitability. And that too, particularly for small and marginal farmers who form a major chunk of the operational holding, around 86 per cent are small and marginal farmers,” he said .
Higher interest rates could also affect access to affordable credit for Self-Help Groups (SHGs) and impact the expansion plans of rural micro, small and medium enterprises (MSMEs) .
NABARD’s refinance support
To support rural lending, NABARD extended around Rs 4.5 lakh crore in concessional refinance assistance and targeted short-term refinance products during 2025-26 .
“Through our refinance support, during 2025-26 itself, we have provided around Rs 4.5 lakh crore concessional refinance assistance and targeted short-term refinance products. We are providing this relatively lower-cost liquidity to the rural financial institutions, reducing their dependence on high-cost borrowings and enabling sustained lending to farmers, SHGs and rural MSMEs,” Sood said .
Outlook
With credit demand expected to remain resilient and NABARD continuing its concessional refinance support, the outlook for agricultural credit in FY27 remains positive, though managing interest rate pressures on small and marginal farmers will be a key challenge going forward .
