NABARD DMD Ajay Kumar Sood projects farm credit demand to remain strong in FY27, driven by higher input costs, expanded KCC coverage, and increased investments in mechanization and agri-infrastructure. Agricultural credit disbursement surged from Rs 8.5 lakh crore in 2014-15 to Rs 30 lakh crore in 2025-26 (provisional). Credit structure is shifting toward long-term investment lending over short-term crop loans. NABARD provided Rs 4.5 lakh crore concessional refinance in 2025-26.

The agricultural credit landscape is experiencing a fundamental structural transformation. Farm credit demand has tripled over the past decade, reflecting India's agricultural modernization. Rising input costs, particularly fertilizers and machinery, drive higher credit requirements. The expansion of Kisan Credit Card coverage brings more farmers into formal banking, while investments in allied activities like food processing, storage infrastructure, and mechanization create new credit avenues. Crucially, the composition is shifting from traditional crop loans to term lending for capital formation - indicating farmers are investing in productivity-enhancing assets rather than just meeting working capital needs. However, this growth faces headwinds. Small and marginal farmers (86% of holdings) operate on 5-10% margins, making them vulnerable to interest rate increases. A 100 basis point rate hike significantly erodes profitability. NABARD's concessional refinance of Rs 4.5 lakh crore helps banks offer affordable credit, reducing their dependence on costly market borrowings. The sector's resilience against external shocks like geopolitical tensions around Strait of Hormuz is supported by robust food grain buffer stocks and diversified fertilizer sourcing. Government initiatives like Natural Farming Mission and PM-KUSUM further strengthen this ecosystem.