Credit Guarantee Fund for Agri Lending

October 7, 2025

Credit Guarantee Fund for Agri Lending

Introduction

The Credit Guarantee Fund for Agri Lending is a government-backed scheme in India designed to make it easier for rural actors like farmers, self-help groups (SHGs), farmer producer organisations (FPOs), and agri-entrepreneurs to access loans without burdensome collateral. It works by offering a guarantee to banks or other lending institutions: if a borrower defaults, the fund absorbs part of the loss. This reduces risk for lenders, encouraging them to extend credit more freely.

The scheme addresses a long-standing problem: many small farmers and nascent producer groups lack assets to pledge as collateral, so banks are reluctant to lend, especially for post-harvest needs or working capital. As a result, producers are often forced to sell produce quickly, even at unfavorable prices, or depend on informal (and expensive) credit sources.

Introduced by the Government of India (through agencies like NABARD and the Small Farmers’ Agri Business Consortium, SFAC) – with relevant guidelines evolving over time – the guarantee fund strengthens agricultural credit flows. For example, the Credit Guarantee Scheme for FPOs provides a dedicated “Credit Guarantee Fund” trust managed via NABARD to support collateral-free lending. More recently, in 2024 a Rs 1,000 crore scheme covering e-NWR (warehouse receipt) based lending was launched to boost post-harvest financing.

Eligible entities must meet criteria set by scheme rules, and the funds aim to generate benefits such as increased credit access, reduced distress sales, and stronger rural incomes. The process to apply is spelled out in official scheme guidelines, so that eligible groups across India can participate fairly.

Overview of the Scheme

The initiative is a central-sector scheme launched by the Government of India, through the Ministry of Agriculture & Farmers Welfare (in close coordination with departments like Food & Public Distribution). One recent extension is the Credit Guarantee Scheme for e-NWR Based Pledge Financing (CGS-NPF), launched on 16 December 2024, with a corpus of ₹1,000 crore.

The scheme is implemented via agencies such as SFAC (Small Farmers’ Agri-Business Consortium) and NABARD (via NABSanrakshan as trustee for FPO guarantee funds). In the case of FPO finance, a dedicated “Credit Guarantee Fund for FPOs” is maintained (₹1,000 crore) and managed by NABARD through its trustee arm.

Key features at a glance

Funding pattern / corpus
• For the FPO guarantee fund: ₹1,000 crore corpus (central share)
• For CGS-NPF: ₹1,000 crore central corpus, fully borne by Government of India
Coverage / sectors / components
• Post-harvest finance via e-NWR (electronic negotiable warehouse receipts) pledging
• Credit (loans), particularly collateral-free lending to farmers, FPOs, cooperatives, traders and MSMEs in allied sectors
• Under FPO scheme, guarantee is for collateral-free loans / credit facilities extended without third-party guarantee
• The guarantee cover is limited (e.g. up to 85% of default in some state schemes)

Current status & recent developments

The scheme is ongoing and was recently expanded in December 2024 with the CGS-NPF for warehouse-receipt-based post-harvest credit.
In the Agriculture Infrastructure Fund (AIF) scheme, credit guarantee coverage is now being extended for eligible borrowers under certain limits, handled via the Credit Guarantee Fund Trust mechanisms.
For FPOs, the guarantee scheme continues under the Trust managed by NABARD’s trustee.

Objectives

The Credit Guarantee Fund for Agri Lending aims to:

Support eligible lending institutions by offering guarantee cover, so they can lend without requiring collateral.
Enable farmers, FPOs, cooperatives, and allied agri-enterprises to access credit more easily and securely.
Reduce the lending risk to banks or financial institutions, so they are more willing to fund agricultural projects and post-harvest financing.
Encourage post-harvest lending by covering pledge financing against e-NWRs (electronic warehouse receipts).
Minimize distress selling of agricultural produce by giving farmers liquidity via guaranteed loans when they store produce in accredited warehouses.
Promote equitable access by giving higher support or favorable terms to small and marginal farmers, women, SC/ST, FPOs, MSMEs in agri supply chains.
Limit guarantee cover as per scheme norms – for example, up to 85% for credit facilities up to a certain amount, and up to Rs.1.50 crore maximum in some cases.

Key Features / Benefits

Guarantee cover for loans against e-NWRs
The scheme offers a guarantee to banks for loans given on the security of electronic negotiable warehouse receipts (e-NWRs). (This means a farmer storing produce in a certified warehouse can get a loan backed by that produce.)

High guarantee percentage for small farmers
Loans up to ₹ 3 lakh get up to 85% guarantee cover for eligible farmers.

Differentiated guarantee for larger loans / other borrowers
For small and marginal farmers, for loans from ₹3 lakh to ₹75 lakh, guarantee is up to 80%. For other borrowers (MSMEs, FPOs, traders), the guarantee is up to 75%.

Low guarantee fee
Farmers pay a small guarantee fee – 0.4% per annum for farm loans, and 1% per annum for non-farm (trader/MSME) loans.

Covers both credit risk and warehouseman risk
The guarantee is designed to protect against both default by borrower and issues arising from warehouse handling.

Broad eligible borrower base
Small and marginal farmers, women, SC/ST, persons with disabilities farmers, FPOs, cooperatives, MSMEs and traders can benefit.

Loans covered under scheme
Agricultural purposes: loans up to ₹ 75 lakh; Non-agricultural / allied: up to ₹ 200 lakh.

Timely claim settlement in stages
If default occurs, claims are settled in installments (e.g. for loans ≤ ₹ 75 lakh: first installment 75% of default amount, then remaining 25%) per scheme norms.

Reduces distress sale pressure
By giving farmers an option to pledge stored produce and get a loan, the scheme helps them avoid selling immediately at low prices.

Encourages banks to lend more in post-harvest financing
Because the risk is partly borne via guarantee, banks may take a more liberal view and increase credit in this space.

Eligibility Criteria

Farmers / Individual Borrowers

Must be small or marginal farmers, standalone farmers, or general farmers as defined under the scheme. (CGS-NPF mentions “small & marginal farmers, women, SC/ST, PwD, other farmers” as eligible borrowers)
No requirement of collateral or third-party guarantee for the guaranteed portion.
Must pledge produce in WDRA-accredited warehouses and obtain an electronic negotiable warehouse receipt (e-NWR) for the stored commodity.
Must submit required documents like Aadhaar, bank account/passbook, proof of ownership/produce in warehouse, e-NWR, identity proofs, and other scheme‐specified forms. (While not all are enumerated in a single source, the scheme documentation implies standard KYC / ownership / receipt documents)

Self-Help Groups (SHGs)

Must be a legally registered SHG or group with banking linkage and an active status (i.e. operational and credit‐worthy) under the scheme’s guidelines.
The loans extended to SHGs must be without collateral in order to qualify for guarantee cover.

Farmer Producer Organisations (FPOs) / Producer Companies

Must be registered as a legal entity, either under Part IXA of the Companies Act or under the Cooperative Societies Act (or equivalent) in the state.
Must have a minimum number of farmer-members: e.g. at least 300 members in plains; for NE/hilly states, a lower threshold (e.g. 100 members) applies.
Should be operational (i.e., carrying out business, not just registered on paper) or willing to start operations under scheme conditions.
If an FPO has already availed a guarantee under another scheme, the new credit facility should be distinct and not duplicate the same exposure.

Entrepreneurs / Startups / MSMEs / Traders

Must be recognized as a MSME, trader, or agri business enterprise eligible under the scheme. CGS-NPF mentions MSMEs and traders among the eligible borrower types.
Where required, must have formal registration such as UDYAM (MSME registration), GST registration, or relevant business registration. (This is implied in scheme guidelines for non-farm borrowers)

Special / Priority Categories

Women, SC/ST, Divyangjan (PwD) farmers are explicitly included among eligible categories and often get the same guarantee benefit as small and marginal farmers.
In hill / northeastern / difficult areas, the FPO membership threshold is relaxed (e.g. 100 instead of 300).

Not Eligible / Exclusions

Activities that are not supported under eligible credit or post-harvest financing categories may be excluded. (The scheme is specifically for credit / pledge finance; non‐eligible non-agricultural or speculative activities may be excluded; though the scheme doesn’t list every exclusion)
For FPOs, if the same credit facility is already under guarantee from another scheme, it is not eligible for duplicate cover.

Application Process

Lending Institution Registration (ELI side)
- The bank, cooperative, or other lending institution (called an Eligible Lending Institution, ELI) first signs up with the scheme by submitting a signed undertaking and board resolution to the Trust (NCGTC).
- After registration, the ELI receives login credentials to the NCGTC portal for guarantee operations.
Loan Application by Borrower
- The farmer, FPO, MSME, etc., approaches the ELI with a request for a pledge finance loan against their stored produce under an e-NWR.
- The ELI prepares the loan application form, filling in sections such as:
  • Beneficiary/borrower details (name, address, identity proof)
  • Warehouse / commodity storage / e-NWR details
  • Loan component / amount requested
  • Bank account and repayment information
Submission of Documents
- The borrower must submit documents such as Aadhaar, bank passbook / account details, proof of product deposit / warehouse receipt, identity proofs, and other scheme‐specified paperwork. (While scheme texts don’t always list every document, these are standard requirements implicit in scheme guidelines.)
- The ELI will upload or attach these documents in the guarantee application (on the portal).
Guarantee Application / Guarantee Cover Request
- Once the loan is sanctioned by the ELI, that institution applies for guarantee cover via the NCGTC portal (Trust’s portal) for the particular loan account.
- The guarantee application includes all the filled form sections and uploaded documents.
Acknowledgment & Application ID
- After submission on the portal, the ELI (or system) issues an application ID / acknowledgement for tracking. (Official scheme documents refer to portal operations and claims submission, implying such acknowledgement steps.)
Verification / Field Inspection
- The Trust / scheme authority may carry out verification or field inspection of the warehouse, stored produce, or borrower’s compliance as needed.
Guarantee Approval / Sanction
- If everything is in order, the Trust grants the guarantee cover for the loan.
- The guarantee becomes effective from the “guarantee start date” (once guarantee fee is paid).
Disbursement of Loan / Assistance Release
- The lending institution disburses the loan to the borrower (via bank account).
- The guarantee does not itself transfer money to the borrower; it protects the lender against default.
- In case of default later, the ELI can invoke the guarantee (after a lock-in period, typically 1 month) and claim from the Trust.
Offline Route (if any)
- The scheme guidelines do not explicitly provide a purely offline application alternative (through block offices or KVK). The guarantee application is meant to be handled via the ELI and Trust portal.
- Borrowers should approach their nearest bank branch / ELI, carry the required documents, and request the ELI to process the guarantee application.
Timelines & Claim/Recovery
- Guarantee claims can be invoked after 90 days of default.
- Claims are settled in phases (for eligible loan sizes) per Trust rules.
- The scheme guide says ELI must take recovery steps before lodging the guarantee claim.
Helpline / Contacts
- For information, the WDRA FAQ page, NCGTC portal, or Trust office can be consulted.
- (No single universal public helpline number/email is listed in the scheme’s core operational documents.)

Tips to Avoid Common Mistakes

Ensure name and Aadhaar / identity documents exactly match the application form, to avoid rejection.
Upload clear, correct copies of all documents (warehouse receipt, bank passbook, identity proofs) – blurry or mismatched ones may delay approval.
Submit the guarantee application promptly after sanction of the loan; delay might jeopardize guarantee validity or timelines.
Keep the application ID / acknowledgement safe, so you can track status or follow-up later.

Challenges or Limitations

Limited number of accredited warehouses
Many farmers live far from WDRA-accredited warehouses, so they can’t deposit produce to get an e-NWR. (PIB notes accreditation of more warehouses as a “challenging task”)
→ Tip: Advocate with local agriculture / warehousing departments to expand accreditation; farmers may cluster to use fewer warehouses jointly.
Delays in verification / inspection
The scheme requires checking warehouses, stored commodities, and documents. Delays here slow down guarantee approval.
→ Solution: Submit all paperwork cleanly and completely; follow up with the lender and the Guarantee Trust to expedite checks.
Budget constraints / corpus limits
The guarantee fund corpus (e.g. ₹1,000 crore for CGS-NPF) is finite and might be insufficient to cover high demand in peak season.
→ Tip: Apply early in the season; lenders may prioritize processing within available ceilings.
Mismatch or incomplete documentation
If identity, produce, or warehouse records don’t line up, the guarantee application may be rejected.
→ Tip: Reconcile and verify all IDs (Aadhaar, land/produce records), check spelling, and ensure warehouse receipts are correctly registered.
Seasonality / constrained time windows
Post-harvest financing is highly time-sensitive. If an application is delayed, the crop may lose value or perish.
→ Solution: Plan ahead (before harvest), coordinate with the lending institution early, and not wait until the last moment.
Awareness gap among farmers and lenders
Some farmers or local bank branches may not fully understand the scheme’s terms, causing under-utilization.
→ Tip: Conduct training / awareness drives; banks should appoint scheme “champions” to guide staff and farmers.
Risk of overlapping guarantees / double cover
If a borrower already has a guarantee on the same credit from another scheme, this scheme may not allow duplicate cover.
→ Tip: Before applying, check whether the loan is already under any guarantee; if yes, adjust the facility or apply cleanly.
Higher administrative / transaction cost per case
Guarantee schemes often involve extra paperwork, processing and monitoring, which can slow down the system. (Such costs are known in guarantee literature)
→ Solution: Use standardized digital forms, streamline workflows at banks, and automate portal steps to reduce overhead.

Government Support & Future Outlook

The Agriculture Infrastructure Fund (AIF) already uses credit guarantee support for eligible infrastructure loans up to ₹2 crore. So the Credit Guarantee Fund for Agri Lending (especially via CGS-NPF) can align with AIF by providing backing for post-harvest lending linked to those infrastructures.
The scheme’s launch note mentions boosting post-harvest lending to ₹5.5 lakh crore over the next 10 years.
In the expansion of AIF (approved August 2024), credit guarantee coverage is being extended for FPOs via NABSanrakshan (in addition to CGTMSE) to support convergence.

How convergence helps a farmer/FPO (practical example):
Suppose an FPO builds a small warehouse under AIF support. Later, that same FPO pledges grain stored in that warehouse and takes a loan using the Credit Guarantee Fund for Agri Lending (CGS-NPF). Because the infrastructure and the guarantee scheme are linked, the FPO gets easier access to credit with less risk for the lender. This reduces cost and encourages more integrated investment.

Going forward, the scheme could expand further by:

Scaling up the number of WDRA-accredited warehouses, so more farmers can benefit.
Aligning with digital agriculture missions and national platforms (e.g. e-Kisan Upaj Nidhi, national commodity repositories) to ease verification and tracking.
Extending guarantee cover in allied mission schemes to reduce duplication and improve coverage.

Conclusion

The Credit Guarantee Fund for Agri Lending plays a crucial role in improving access to credit for farmers, FPOs, SHGs, and agri-entrepreneurs who often struggle to secure loans due to lack of collateral. By sharing the lending risk with banks, the scheme encourages formal credit flow into agriculture and allied sectors, supporting investments in storage, processing, and value addition. Small and marginal farmers, in particular, gain through easier loans and reduced dependence on informal credit sources. Those interested should first check their eligibility and application requirements on the official portal https://agriinfra.dac.gov.in or contact the nearest agriculture or NABARD office to prepare necessary documents. Always verify the latest guidelines, benefits, and timelines from official government sources before applying.

Explore detailed resources on this scheme and the full suite of programmes at ALL ABOUT AGRICULTURE. For one-on-one assistance, call us at +91 8484002628.

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