Mod 3: Agricultural Credit and Crop Insurance
4B.3.1 Sources of farm credit — who lends, and how much
🏫 School → 🇮🇳 UPSC · NCERT-linked · latest official data
- School
- Class 10+2
- BPSC
- UPSC
- Separate institutional and non-institutional credit.
- Draw the cooperative credit structure.
- Rank lenders by share with the latest data.
- Know who gives long-term credit.
A Bihar farmer borrows ₹20,000 from a moneylender at 5% a month. A bank KCC would charge 4% a year (on time). Why might he still go to the moneylender?
Show answer
No collateral, quick cash, no paperwork, and a bank branch may be far away. That is why NCERT stresses expanding formal (institutional) credit to rural households.
Formal and informal — know examples of each.
| Type | Lenders |
|---|---|
| Institutional | Cooperative societies & banks (PACS, DCCB, StCB, LDBs), commercial banks, regional rural banks, government (taccavi loans) |
| Non-institutional | Moneylenders, traders, landlords, relatives |
📌 Solves: Q235, Q236, Q237
Short-term money flows down three steps; long-term money has its own banks.
📌 Solves: Q238, Q239
Commercial banks now give four of every five rupees.
📌 Solves: Q240, Q241, Q242, Q243
CheckQuick check: Which gives the least institutional farm credit: CBs, foreign private banks, cooperatives or RRBs?
Foreign private banks.
Weak governance, losses and slow recapitalisation, while commercial banks expanded priority-sector lending and KCC.
1 markGive one example each of formal and informal credit.
Formal: commercial bank. Informal: moneylender.
3 marksDraw the short-term cooperative credit structure.
StCB → DCCB → PACS.
PYQ patternLong-term agricultural credit is provided by: (a) PACS (b) DCCB (c) Land Development Bank (d) State Cooperative Bank
(c).
PrelimsIn 2024-25, which had a larger share of institutional farm credit — RRBs or cooperatives?
RRBs (10.70% vs 8.37%).
Q237 · Q236 · Q241 · Q240 · Q243 · Q242 · Q239 · Q235 · Q238
Arranged in chronological order of exam year in the Questions panel →
- Find the nearest PACS and DCCB branch to your village.
- I can list institutional and non-institutional lenders.
- I can draw the cooperative ladder.
- I know the 2024-25 shares.
- Institutional: cooperatives, CBs, RRBs, govt.
- Short-term coop: StCB → DCCB → PACS; long-term: LDBs.
- CB share 53.7% → 80.93%; coop 39.5% → 8.37%; RRB 6.9% → 10.70%.
- NABARD AR 2021-22: CBs ≈ ¾.
- RBI data on agricultural credit (Aug 2025); NABARD Annual Report 2021-22.
- NCERT Class 10 Economics Ch 3.
- Commercial banks 80.93% of institutional agri credit (2024-25).
- RRBs 10.70%, cooperatives 8.37% (2024-25).
- Long-term credit: Land Development Banks.
- DCCBs fund PACS.
- Question: Largest source of agricultural credit? Answer: Commercial banks.
- Question: Long-term agricultural credit is given by? Answer: Land Development Banks.
- Question: Main function of DCCBs? Answer: Providing funds to PACS.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q237 · I.A.S. (Pre) 1999
The farmers are provided credit from a number of sources for their short-and long-term needs. The main sources of credit to the farmers include:
PYQ · Q236 · 44th B.P.S.C. (Pre) 2000
Which is not a source of agricultural finance in India?
Institutional: coops, commercial banks, RRBs, government. Non-institutional: moneylenders, relatives, traders.
PYQ · Q241 · U.P.P.C.S. (Spl.) (Mains) 2004
Followings are the sources of institutional credit to agriculture in India: 1. Co-operative Banks 2. Regional Rural Banks 3. Commercial Banks. Which one is the correct sequence in descending order of their importance?
Then CB > coop > RRB. Coop share fell 39.5% to 8.37%; RRB 6.9% to 10.70% (1999-2000 to 2024-25) — so in 2024-25 RRBs exceed cooperatives.
PYQ · Q240 · U.P.P.C.S. (Mains) 2008
Which one of the followings is the largest source of agricultural credit in India in recent years?
NABARD AR 2021-22: CBs ~3/4. CB share 53.7% (1999-2000) to 80.93% (2024-25).
PYQ · Q243 · U.P.P.C.S. (Mains) 2010
Which among the followings is providing least institutional credit to agriculture and allied activities in recent years?
PYQ · Q242 · I.A.S. (Pre) 2011
In India, which of the followings have the highest share in the disbursement of credit to agriculture and allied activities?
PYQ · Q239 · U.P.P.C.S. (Mains) 2014
Long-term agricultural credit is provided by:
Formerly Land Mortgage Banks.
PYQ · Q235 · U.P.P.C.S. (Mains) 2016
Which of the following is the main principle of agriculture finance?
PYQ · Q238 · I.A.S. (Pre) 2020
Consider the following statements: 1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks. 2. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural Credit Societies.
RBI Aug 2025, 2024-25 share of institutional agri credit: commercial banks 80.93%, RRBs 10.70%, cooperatives 8.37%.
One-liners
Write your answer, then submit to see the correct answer.
Largest source of agricultural credit?
Commercial banks.Long-term agricultural credit is given by?
Land Development Banks.Main function of DCCBs?
Providing funds to PACS.4B.3.2 Kisan Credit Card, interest subvention and credit targets
🏫 School → 🇮🇳 UPSC · NCERT-linked · latest official data
- School
- Class 10+2
- BPSC
- UPSC
- Know KCC: year, model, purposes.
- Work out the effective interest rate.
- Quote the credit targets.
- Order RRB, NABARD, SHG-BLP, KCC.
A farmer borrows ₹3 lakh on KCC at 7% and repays on time. What does he actually pay?
Show answer
With 3% prompt-repayment incentive, effectively 4% — ₹12,000 a year instead of ₹21,000.
KCC is one card for many short-term needs.
| Purpose | Covered? |
|---|---|
| Short-term credit for crops | ✔ |
| Post-harvest expenses | ✔ |
| Working capital for farm assets and allied activities | ✔ |
| Consumption needs of farm households | ✔ |
| Investment credit (pump sets, sprayers, dairy animals) | ✔ |
| Combine harvesters, tractors, mini-trucks | ✘ |
| Family house, village cold storage | ✘ |
📌 Solves: Q246, Q247, Q248, Q249
CheckQuick check: When was KCC introduced?
1998 (1998-99).
Do the subtraction with the calculator.
Since 2025-26 the limit is ₹5 lakh. Late repayers (after one year) do not get the extra 3%.
📌 Solves: Q232, Q245
Watch the target more than double in five years.
📌 Solves: Q244
Put four milestones in order — then check.
- Regional Rural Banks (1975)
- NABARD (1982)
- SHG–Bank Linkage Programme (1992-93)
- Kisan Credit Card (1998)
RRB 1975 → NABARD 1982 → SHG-BLP 1992 → KCC 1998 = 4, 1, 2, 3 (option a).
📌 Solves: Q250
Yes — KCC was extended to animal husbandry and fisheries in 2018-19.
1 markWho prepared the KCC model?
NABARD (R.V. Gupta Committee).
NumericalBank rate 7%, incentive 3%, loan ₹2 lakh. Interest paid in a year?
₹8,000 (4%).
PYQ patternAgri credit target 2020-21? (a) 10 (b) 13.5 (c) 15 (d) 16.5 lakh crore
(c) ₹15 lakh crore.
PrelimsCan KCC be used for buying a tractor?
No — that is term investment outside KCC’s short-term purposes.
Q247 · Q232 · Q249 · Q248 · Q244 · Q246 · Q250 · Q245
Arranged in chronological order of exam year in the Questions panel →
- Use the calculator for ₹5 lakh: how much does a prompt repayer save?
- I know KCC purposes.
- I can compute the effective rate.
- I know credit targets.
- I can order RRB–NABARD–SHG–KCC.
- KCC 1998 (NABARD, R.V. Gupta Committee).
- Subvention: 7% − 3% = 4%; limit ₹5 lakh from 2025-26.
- Targets: ₹15 lakh cr (2020-21) → ₹32.5 lakh cr (2025-26).
- KRP 2023: claims went earlier to RBI & NABARD.
- RRB 1975 → NABARD 1982 → SHG-BLP 1992 → KCC 1998.
- NABARD; RBI Master Circular on KCC.
- Union Budgets 2020-21 to 2025-26.
- DA&FW — Modified Interest Subvention Scheme.
- KCC introduced 1998-99; NABARD model (R.V. Gupta Committee).
- Effective interest 4% for prompt repayment (since 2011-12).
- Credit target ₹32.5 lakh crore (2025-26).
- Kisan Rin Portal launched 2023.
- Question: KCC introduced in? Answer: 1998-99.
- Question: Effective interest for prompt repayment? Answer: 4%.
- Question: Agri credit target 2025-26? Answer: ₹32.5 lakh crore.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q247 · U.P.P.C.S. (Spl.) (Mains) 2008; U.P.P.S.C. (GIC) 2010
Kisan Credit Card Scheme was announced in the year:
PYQ · Q232 · U.P.P.C.S (Pre) 2011
In the Union Budget 2011-2012, the effective rate of interest for farmers on timely repayment of bank loan is:
Interest Subvention 2006-07: Rs 3 lakh at 7%; prompt repayment 3% (from 2% in 2011-12) -> 4%. Modified 2022: 1.5% subvention to lenders; limit Rs 5 lakh from 2025-26.
PYQ · Q249 · U.P. R.O./A.R.O. (Mains) 2014
Kisan Credit Card scheme was brought for the farmers in:
PYQ · Q248 · U.P. R.O./A.R.O. (Pre) 2016
Consider the following statements about Kisan Credit Card Scheme - 1. The Kisan Credit Card scheme was launched in the year 2001. 2. This scheme provides adequate and timely credit support to the farmers for their cultivation needs.
PYQ · Q244 · 66th B.P.S.C. (Pre) 2020
To improve institutional agricultural credit flow, what credit target for 2020-21 has been fixed in the Union Budget of India?
Targets: 2020-21 Rs 15 lakh cr; 2021-22 16.5; 2022-23 18; 2023-24 20; 2024-25 27.50 (sub-target 4.20 AHDF); 2025-26 32.50 (sub-target 5.0 AHDF).
PYQ · Q246 · I.A.S. (Pre) 2020
Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes? 1. Working capital for maintenance of farm assets 2. Purchase of combine harvesters, tractors and mini trucks 3. Consumption requirements of farm households 4. Post-harvest expenses 5. Construction of family house and setting up of village cold storage facility
KCC 1998, NABARD model, R.V. Gupta Committee. Objectives: crop short-term credit, post-harvest, working capital, consumption, investment credit (pumps, sprayers, dairy animals).
PYQ · Q250 · U.P. P.C.S. (Pre) 2020; U.P. R.O./A.R.O. (Mains) 2021
Arrange in chronological order: 1. Establishment of NABARD 2. Self Help Group Bank Linkage Programme 3. Kisan Credit Card Plan 4. Establishment of Regional Rural Bank
RRB 1975; NABARD 1982; SHG-BLP 1992-93; KCC 1998.
PYQ · Q245 · 71st B.P.S.C. (Pre) 2025
Before the launch of Kisan Rin Portal (KRP), farmers used to submit manual claims under the Interest Subvention and Prompt Repayment Incentive schemes to which of the following institution/s?
KRP launched 2023. Technically banks (not farmers) submitted claims to RBI and NABARD.
One-liners
Write your answer, then submit to see the correct answer.
KCC introduced in?
1998-99.Effective interest for prompt repayment?
4%.Agri credit target 2025-26?
₹32.5 lakh crore.4B.3.3 Crop insurance — from CCIS (1985) to PMFBY
🏫 School → 🇮🇳 UPSC · NCERT-linked · latest official data
- School
- Class 10+2
- BPSC
- UPSC
- Order the crop insurance schemes chronologically.
- Know PMFBY premiums and coverage.
- Know WBCIS, Varsha Bima and the role of AIC.
Hailstorm flattens a farmer’s wheat two weeks before harvest. What protects his income?
Show answer
Crop insurance — under PMFBY he pays a small premium (1.5% for rabi) and the government pays the rest of the actuarial premium.
Read the ladder top to bottom; every rung is a PYQ.
📌 Solves: Q162, Q163, Q164, Q165, Q166, Q167
Farmers pay a flat, low share; Centre and States pay the rest.
| Crop type | Max farmer premium (% of sum insured) |
|---|---|
| All Kharif food & oilseed crops | 2% |
| All Rabi food & oilseed crops | 1.5% |
| Annual commercial / horticultural crops | 5% |
Farmer pays the lower of the actuarial rate and the cap; the rest is shared by Centre and State.
📌 Solves: Q161
Agriculture Insurance Company of India (AIC) is the specialist.
📌 Solves: Q168
Yes — if rain deficit or adverse weather stops sowing, up to 25% of sum insured can be paid.
1 markWhen did crop insurance start in India?
1985 (CCIS).
2 marksGive PMFBY premium rates.
Kharif 2%, Rabi 1.5%, commercial/horticulture 5%.
PYQ patternNAIS was launched in: (a) 1995-96 (b) 1998-99 (c) 1999-2000 (d) 2001-02
(c).
PrelimsVarsha Bima was introduced in the 2007 SW monsoon. True/False?
False — 2004.
Q163 · Q164 · Q165 · Q168 · Q166 · Q162 · Q167 · Q161
Arranged in chronological order of exam year in the Questions panel →
- Use the calculator: sum insured ₹80,000, actuarial rate 10%, kharif — how much does the farmer pay?
- I can order the insurance schemes.
- I know PMFBY premiums.
- I know AIC’s role.
- CCIS 1985 → NAIS Rabi 1999-2000 (Kharif 2004-05) → WBCIS 2007 → MNAIS 2010 → NCIP 2013 → PMFBY 2016 → 2.0 2020.
- PMFBY: 2% / 1.5% / 5%.
- WBCIS first Karnataka.
- Varsha Bima 2004 by AIC.
- AIC took over from GIC after 2002-03.
- PMFBY operational guidelines (revised 2020); Ministry of Agriculture & FW.
- AIC of India — history of schemes.
- CCIS: 1 April 1985.
- NAIS: Rabi 1999-2000; Kharif from 2004-05.
- WBCIS: Kharif 2007, Karnataka.
- PMFBY: 13 Jan 2016; farmer premium 2% kharif, 1.5% rabi, 5% commercial.
- Question: Crop insurance first started in? Answer: 1985 (CCIS).
- Question: Where was WBCIS first implemented? Answer: Karnataka.
- Question: Farmer premium for rabi crops under PMFBY? Answer: 1.5%.
MCQs — previous-year questions in exam-year order
Answer this question, then use Next.
PYQ · Q163 · I.A.S. (Pre) 2001
National Agricultural Insurance Scheme replacing Comprehensive Crop Insurance Scheme was introduced in the year:
NAIS Rabi 1999-2000; extended to Kharif in Budget 2004-05. NCIP from Rabi 2013-14 (NAIS, MNAIS from Rabi 2010-11, WBCIS Kharif 2007, CPIS 2009-10).
PYQ · Q164 · Uttarakhand P.C.S. (Pre) 2016; U.P.P.C.S. (Mains) 2003
National Agricultural Insurance Scheme was launched in the year:
PYQ · Q165 · U.P.P.C.S. (Mains) 2004
In which financial year, the Union Budget proposed to extend the National Agriculture Insurance Scheme to Kharif crop as well?
PYQ · Q168 · U.P.P.C.S. (Spl.) (Mains) 2008
Crop Insurance is under the monopoly of:
The book marks this (*): in the question period crop insurance was run only by the Agriculture Insurance Company of India (AIC), which took over from the General Insurance Corporation after 2002-03. AIC is not among the printed options, so it has been added. Today AIC and empanelled public and private insurers implement the schemes. Then AIC (took over from GIC, which ran it till 2002-03). Now AIC + empanelled public & private insurers.
PYQ · Q166 · U.P.U.D.A./L.D.A. (Mains) 2010
Weather Based Crop Insurance scheme was first implemented in:
Karnataka Kharif 2007; 10 states Kharif 2008; AIC. Restructured WBCIS Kharif 2016 in 12 states.
PYQ · Q162 · U.P.P.C.S. (Mains) 2012
Crop Insurance Scheme in India was started in:
CCIS 1 April 1985 (Kharif).
PYQ · Q167 · 56th-59th B.P.S.C. (Pre) 2015
Consider the following Statements: 1. Varsha Bima, the rainfall insurance scheme, is managed by the Agriculture Insurance Company of India Ltd. (AICIL). 2. The scheme was introduced during the 2007 South-West monsoon period.
Varsha Bima 2004 SW monsoon, 20 areas of AP, UP, Karnataka, Rajasthan.
PYQ · Q161 · I.A.S. (Pre) 2016
With reference to 'Pradhan Mantri Fasal Bima Yojana', consider the following statements: 1. Under this scheme, farmers will have to pay a uniform premium of two percent for any crop they cultivate in any season of the year. 2. This scheme covers post-harvest losses arising out of the cyclones and unseasonal rains.
Launched 13 Jan 2016 (Kharif 2016), replaced NAIS & MNAIS. Premium 2% kharif, 1.5% rabi, 5% commercial/horticultural. Revamped PMFBY 2.0 from Kharif 2020, extended through 2025-26.
One-liners
Write your answer, then submit to see the correct answer.
Crop insurance first started in?
1985 (CCIS).Where was WBCIS first implemented?
Karnataka.Farmer premium for rabi crops under PMFBY?
1.5%.