In the backdrop of the economic liberalization of India in the early 1990s and increasing pressures for agricultural modernization and self-sufficiency, the Reserve Bank of India, between 1991 and 1998, focused on promoting increased flow of credit to agriculture from both the National Bank for Agriculture and Rural Development and commercial banks. There was a puzzle before the Reserve Bank of India: Why had investments in agriculture not kept pace with demand? To make recommendations on both operational and policy issues, a one-person, high-level committee comprising Deputy Governor R. V. Gupta was established in 1997 by Governor of the RBI, Bimal Jalan. It was asked to identify the constraints faced by commercial banks in increasing the flow of credit, introducing new services, and simplifying procedures to enable rural borrowers to access credit. The committee was to visit select branches and regional offices of commercial banks, gather feedback from agriculturalists, farmers, borrowers, scientists, and others, and propose initiatives.

The committee’s report recommended that all banks simplify their loan agreements, credit appraisal be done to assess in detail the income stream of borrowers and the credibility of loan proposals, loan applications be resolved at the branch level, and short-term credit to farmers cover production, postharvest, and (direct or indirect) household-expense needs. It also recommended, among other things, offering farmers a liquid savings product with an appropriate return, disbursing agricultural loans mainly in cash to eliminate corruption, relaxing the requirement to obtain no-due certificates for loans, improving the collection of bank dues, and offering incentives to farmers who repay promptly. In 1998, the Reserve Bank of India asked all commercial banks to implement the Gupta Committee’s recommendations. In August 1998, following the committee’s recommendations, the National Bank for Agriculture and Rural Development (NABARD) launched the Kisan Credit Card scheme. This initiative provided farmers with credit cards that facilitated access to both term loans and short-term credit specifically for crop-related expenses. The scheme was implemented in collaboration with various financial institutions, including commercial banks, regional rural banks, and state cooperative banks. The government introduced at least one specialized agricultural bank in each state and introduced a cash credit facility, and measures were taken to augment the Rural Infrastructure Development Fund with NABARD to finance rural infrastructure-development projects by states.

In addressing barriers to agricultural credit, the Gupta Committee recommended simplifying procedures, improving credit access for farmers, and incentivizing timely repayment. Its initiatives, including the Kisan Credit Card scheme, sought to modernize rural financing and support agricultural development.