To address gaps in credit delivery to the agriculture sector, a Reserve Bank of India panel has recommended suitable measures, including the setting up of a credit guarantee scheme jointly by the Centre and States, upping the target for banks to lend to small and marginal farmers (SMFs), and avoiding loan waivers. Banks should be allowed to give consumption loans to farmers up to a sanctioned limit of ₹1 lakh under priority sector lending (PSL), provided they are able to obtain collateral security and are satisfied with their repayment capacity based on the cash flows of the borrowers, the group said. However, such loans will not classify for PSL-Agri. The IWG said interest subvention scheme should be replaced with direct benefit transfer to targeted beneficiaries – SMFs, tenant farmers, sharecroppers, oral lessees, and landless labourers as individual borrowers or through self-help group/joint liability group model, with an overall limit of ₹3 lakh per individual farmer. In order to consult States and build consensus among them over reforms related to agriculture, the IWG, which was headed by MK Jain, Deputy Governor, felt that there is a need for a federal institution, established on the principle of cooperative federalism, having representation from both Central as well as State governments. Hence, it recommended that the government should set up a federal institution, on the lines of the GST (Goods and Services Tax) Council.

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