Content

1. Empowering Annadatas: Pradhan Mantri Fasal Bima Yojana
2. Comprehensive reforms taken up to instill credit discipline in PSBs

Empowering Annadatas: Pradhan Mantri Fasal Bima Yojana

Background & Context

• Launched: 18 February 2016, replacing earlier schemes like NAIS & MNAIS.
• Objective: Provide affordable, comprehensive crop insurance to farmers for protection against non-preventable natural risks.
• Coverage: Pre-sowing to post-harvest stages, including damage during storage (if due to notified calamities).
• Principle: One Nation – One Crop – One Premium.
• Type: Area-based crop insurance scheme.

Relevance : GS 2(Governance , Schemes) ,GS 3(Agriculture)

Key Performance Statistics (2016–2025)

• Total applications insured: 78.41 crore.
• Claims paid: ₹1.83 lakh crore to 22.667 crore farmers.
• Enrolment growth:
  • 3.17 crore farmers (2022–23) → 4.19 crore (2024–25) → 32% increase (highest since inception).
• Non-loanee farmer participation:
  • 20 lakh (2014–15) → 522 lakh (2024–25).
• Farmer applications coverage:
  • 371 lakh (2014–15) → 1510 lakh (2024–25).
• Largest crop insurance scheme in the world (in terms of farmer applications)

Financial Structure

• Premiums paid by farmers:
  • Kharif food/oilseed crops – 2% of sum insured.
  • Rabi food/oilseed crops – 1.5%.
  • Annual commercial/horticultural crops – 5%.
• Government’s share:
  • Remaining 95–98.5% borne by Centre & State.
  • Sharing ratio:
    • Normal States – 50:50.
    • NE States (Kharif 2020 onwards) & Himalayan States (Kharif 2023 onwards) – 90:10.

Risk Coverage under PMFBY

• Yield Losses: Drought, floods, pests, diseases, cyclones, hailstorms, landslides, etc.
• Prevented Sowing: Up to 25% of sum insured if sowing fails due to adverse weather.
• Post-harvest Losses: Up to 14 days from harvest for “cut & spread” crops damaged by cyclones/cyclonic rains.
• Localized Calamities: Hailstorms, landslides, inundation impacting individual farms.

Implementation Reforms (2016–2025)

Transparency & Accountability

• National Crop Insurance Portal (NCIP): Centralized online enrolment, data sharing, and direct transfer of claims.
• Digi-Claim Module:
  • Operational since Kharif 2022.
  • Linked to PFMS & insurer systems for real-time settlement.
  • Automatic 12% penalty on delayed payments (from Kharif 2024).
• Premium Subsidy Reform: Central subsidy disbursed separately from State share to avoid delays.
• Mandatory ESCROW Accounts (from Kharif 2025): For timely State premium contribution.

Farmer Awareness Initiatives

• ‘Meri Policy Mere Haath’: Physical distribution of insurance policies at village level.
• Fasal Bima Saptah (twice yearly) & Fasal Bima Pathshalas to educate farmers.
• KrishiRakshak Portal & Helpline (14447): Ticket-based grievance redressal within fixed timelines.

Technology Integration

• YES-TECH:
  • Remote sensing-based yield estimation.
  • Launched for paddy & wheat (Kharif 2023), soybean added in Kharif 2024.
  • Minimum 30% weightage given to YES-TECH data in yield calculation.
• WINDS:
  • Expanded network of Automatic Weather Stations & Rain Gauges (5x increase).
  • Supports hyper-local weather data for PMFBY, drought management, weather forecasting.

Institutional & Policy Continuity

• January 2025 Cabinet Approval:
  • Continuation of PMFBY & RWBCIS till 2025–26.
  • Budget: ₹69,515.71 crore.
• RWBCIS (Weather Based Crop Insurance Scheme):
  • Weather-index based claim calculation (vs. yield-based in PMFBY).

Farmer Profile in PMFBY (2024–25)

• Tenant farmers: 6.5% of applications.
• Marginal farmers: 17.6%.
• Loanee farmers: 48%.
• Remaining: Non-loanee small & medium farmers.

Significance

• Reduces farmers’ vulnerability to climate risks and income shocks.
• Encourages investment in improved seeds, mechanization, and sustainable practices.
• Prevents debt traps by ensuring timely financial assistance.
• Promotes inclusive coverage (sharp rise in non-loanee participation).

Challenges

• Delay in State premium share: Still a cause for delayed claim settlements despite reforms.
• Yield estimation disputes: Technology integration ongoing but not fully scaled.
• Awareness gaps: Many small/marginal farmers still lack complete understanding of claim procedures.
• Voluntary enrolment for loanee farmers: Risk of lower participation if not incentivized.

Pointers

• Schemes Linkage: PMFBY aligns with Doubling Farmers’ Income, National Mission on Sustainable Agriculture.
• SDG Linkage:
  • SDG 1 (No Poverty).
  • SDG 2 (Zero Hunger).
  • SDG 13 (Climate Action).

Comprehensive reforms taken up to instill credit discipline in PSBs

Background & Rationale for Reforms in PSBs

• Persistent NPA crisis in 2010s weakened credit growth and bank profitability.
• Poor credit discipline due to lax appraisal, political interference, and evergreening of loans.
• Governance gaps in PSBs, with weak accountability of top management.
• Technology gap and inefficiency compared to private sector banks.
• Low credit penetration to MSMEs and underserved sectors despite priority sector lending mandates.

Relevance : GS 3(Banking and Economy)

Comprehensive Reforms to Instill Credit Discipline

a) Legal & Institutional Framework

• Insolvency and Bankruptcy Code (IBC), 2016 – Time-bound resolution of corporate insolvency; deterrence against willful default.
• Central Repository of Information on Large Credits (CRILC) – RBI database for monitoring loans >₹5 crore; enables early detection of stress.
• Early Warning Systems – Automated, data-driven triggers to flag potential NPAs using third-party data and transaction monitoring.
• Market-based Stressed Asset Transfer Framework – Allows eligible entities to acquire stressed loans; reduces PSB balance sheet risk.
• National Asset Reconstruction Company Ltd. (NARCL) – ‘Bad bank’ model for aggregating and resolving large stressed debts.

b) Governance & Risk Management

• Arms-length appointment of top PSB executives through Financial Services Institutions Bureau (FSIB).
• Non-Executive Chairmen in nationalised banks for better board oversight.
• Performance-linked tenure extensions for MDs/CEOs.
• Enhanced Access & Service Excellence (EASE) Reforms – Benchmarking governance, risk management, HR, and technology adoption.
• Amalgamation of PSBs (2017–2020) – Consolidated 27 PSBs into 12 for scale economies and operational efficiency.

c) Legislative Measures

• Banking Regulation (Amendment) Act, 2020 – Extended RBI oversight to co-operative banks; improved depositor protection.
• Banking Laws (Amendment) Act, 2025 – Higher governance standards, stronger audit norms, statutory reporting to RBI, simplified nomination processes.

Technology Adoption & Financial Inclusion

• JAM Trinity (Jan Dhan–Aadhaar–Mobile) – Enabled mass DBT payments and reduced leakages.
• UPI, interoperable Bank Mitras, and DBTs – Brought millions into the formal payment ecosystem.
• Digital payment growth (FY 2017–18 → FY 2024–25):
  • Volume: 2,071 crore → 22,831 crore (CAGR 41%)
  • Value: ₹1,962 lakh cr → ₹3,509 lakh cr
• UPI growth:
  • Volume: 92 crore → 18,587 crore (CAGR 114%)
  • Value: ₹1.10 lakh cr → ₹261 lakh cr
  • Milestone: July 2025 – 1,946.79 crore monthly transactions.

Measures to Boost Credit Flow to MSMEs

a) Credit Guarantee & Liquidity Support

• Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME, 2025) – Government-backed guarantee for term loans up to ₹100 crore for equipment/machinery purchase; total guarantee cap ₹7 lakh crore or 4 years.
• Emergency Credit Line Guarantee Scheme (ECLGS) – 100% guarantee to lenders; liquidity support of ₹3.68 lakh crore to 1.19 crore businesses, including ₹2.42 lakh crore to 1.13 crore MSMEs.

b) Credit Appraisal Reforms

• New Credit Assessment Model for MSMEs (2025) – Uses digital, verifiable data and automated risk scoring; covers both Existing-to-Bank (ETB) and New-to-Bank (NTB) borrowers.

c) Strengthening CGTMSE

• Guarantee cover up to 85% for loans ≤ ₹10 crore to MSEs.
• Reduced annual guarantee fee (0.37% – 1.20%).
• Cumulative guarantees as on 31 July 2025: 1.22 crore guarantees worth ₹10.50 lakh crore.

Impact Assessment

• Credit discipline improved via IBC deterrence, CRILC monitoring, and early warning systems.
• NPA recovery & resolution efficiency enhanced through NARCL and market-based transfer frameworks.
• Governance quality in PSBs significantly upgraded via FSIB, EASE, and mergers.
• MSME credit penetration widened through targeted guarantees and digital credit appraisal.
• Digital payments ecosystem transformed, making India the global leader in real-time transactions.
• Co-operative bank stability improved via 2020 Banking Regulation amendments.