The Gujarat government has approved ₹174.07 crore in interest assistance to cooperative banks, providing a 2 per cent interest relief on short-term agricultural loans disbursed to farmers from the banks' own funds between 1 April and 30 September 2025. The move is expected to benefit more than 10 lakh farmers across the state by capping their crop loan interest rate at a concessional 7 per cent.

What the Scheme Covers

Agriculture Minister Jitu Vaghani said the decision was taken under Chief Minister Bhupendra Patel's leadership with the twin goal of reducing the interest burden on farmers and strengthening Gujarat's cooperative agricultural credit structure. The assistance covers loans disbursed exclusively from cooperative banks' own funds during the six-month period.

Prior to the scheme's introduction in 2009-10, most cooperative banks charged farmers interest rates ranging from 10 per cent to 13 per cent. The 2 per cent state subsidy bridges the gap between what cooperative banks pay to raise funds and the concessional rate passed on to borrowers, ensuring that the higher cost of funds does not fall on farmers.

Gujarat's Cooperative Credit Network

The state operates a three-tier cooperative agricultural credit network comprising one state cooperative bank, 18 district central cooperative banks, and more than 10,900 Primary Agricultural Credit Societies (PACS). Together, this network serves as a financial lifeline for farmers in rural pockets where nationalised and private banks have limited or no presence — in several gram panchayats, cooperative institutions remain the sole source of agricultural credit.

According to Minister Vaghani, approximately 33 per cent of the state's small and marginal farmers are linked to this cooperative credit system, making them the primary beneficiaries of the latest relief measure.

Why Cooperative Banks Need the Support

Cooperative banks typically face a higher cost of funds compared with scheduled commercial banks, which structurally limits their ability to offer competitive lending rates without state support. The interest assistance compensates for this differential, helping preserve the viability of the cooperative lending model while keeping credit affordable for farmers. This is a continuation of a policy approach Gujarat has maintained since 2009-10, reflecting the government's long-standing view that cooperative credit is indispensable to the state's agrarian economy.

Broader Impact on Farmers

The government reiterated its commitment to ensuring that farmers receive agricultural loans conveniently, on time, and at affordable interest rates through cooperative banks. The relief is particularly significant for small and marginal farmers, who constitute the majority of cooperative credit users and are least equipped to absorb higher borrowing costs. With the Kharif crop cycle requiring timely credit access, the ₹174.07 crore outlay is positioned as both a direct financial relief measure and a structural investment in rural credit delivery.

The government is expected to continue the scheme in subsequent periods, given the cooperative sector's enduring role in reaching the last mile of Gujarat's agricultural economy.