Union Finance Minister Nirmala Sitharaman called on rural banks to ramp up agricultural credit disbursement to address the evolving needs of India's countryside during a performance review of Karnataka Grameena Bank (KaGB) in Ballari on October 17, 2025. Chairing the session with Department of Financial Services Secretary M. Nagaraju, NABARD Chairman Shaji K.V., and other finance ministry officials, Sitharaman stressed the importance of aligning banking services with the aspirations of a dynamic "new rural India". The directive comes amid India's push to modernise rural finance, building on the government's target of Rs 20 lakh crore in agricultural credit for FY 2025-26, aimed at empowering small farmers and boosting food security in a nation where agriculture employs nearly half the workforce.

Sitharaman scrutinised KaGB's operations, evaluating metrics like credit growth, non-performing assets (NPAs), financial inclusion, and execution of government schemes. She mandated an increased allocation for ground-level agriculture credit, particularly in nascent sectors, and urged stakeholders to harness the untapped potential of allied activities such as dairy, fisheries, and agro-processing. "KaGB and Canara Bank should collaborate closely with state departments to enhance lending to MSMEs and allied sectors," the minister stated, as per the official release. This focus aligns with recent GST rationalisations, which have spurred rural consumption and unlocked fresh funding avenues for banks in semi-urban areas. By capitalising on these trends, rural lenders can play a pivotal role in sustaining economic momentum, especially as rural distress eases post-pandemic and monsoon-dependent incomes stabilise.

A key emphasis was placed on supporting Farmer-Producer Organisations (FPOs), which have proliferated under initiatives like the Rs 6,865 crore FPO scheme launched in 2020 to aggregate smallholders and improve market access. Sitharaman noted that while development institutions often cover capital needs, banks must step up for working capital requirements. She advocated tailoring products to FPO demands, fostering symbiotic growth that benefits both entities and drives sustainable rural development.

Additionally, the minister highlighted the shift of industries—like data centres—from metro cities to smaller hubs, advising KaGB to target these opportunities to bolster profitability and mitigate risks from stressed assets. This strategic pivot reflects broader economic decentralisation efforts, including the Atmanirbhar Bharat campaign, to distribute growth beyond urban cores.

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To enhance outreach, Sitharaman recommended partnering with panchayat and district committees for better scrutiny of applications under schemes like PM-Vishwakarma, which aids artisans with credit and training, and PMFME, which promotes micro food enterprises. She directed KaGB to expand branches in the underserved Kalyana Karnataka region, a backward area spanning six districts, while prioritising asset quality, technological upgrades, and superior customer service.

These measures, if implemented, could transform KaGB—a regional rural bank sponsored by Canara Bank serving over 3,000 villages—into a more resilient institution. As India grapples with climate vulnerabilities and supply chain disruptions in agriculture, Sitharaman's blueprint underscores the banking sector's critical role in equitable progress, potentially influencing national credit policies in the upcoming Union Budget cycle.

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