Rise in climate change-induced drought occurrences have amplified pollution of metal(loid)s, deteriorated soil quality, and deterred growth of crops. Rice straw-derived biochars (RSB) and cow manure-enriched biochars (CEB) were used in the investigation (at doses of 0%, 2.5%, 5%, and 7.5%) to ameliorate the negative impacts of drought, improve soil fertility, minimize arsenic pollution, replace agro-chemical application, and maximize crop yields. Even in soils exposed to severe droughts, 3 months of RSB and CEB amendment (at 7.5% dose) revealed decreased bulk density (13.7% and 8.9%), and increased cation exchange capacity (6.0% and 6.3%), anion exchange capacity (56.3% and 28.0%), porosity (12.3% and 7.9%), water holding capacity (37.5% and 12.5%), soil respiration (17.8% and 21.8%), and nutrient contents (especially N and P). Additionally, RSB and CEB decreased mobile (30.3% and 35.7%), bio-available (54.7% and 45.3%), and leachable (55.0% and 56.5%) fractions of arsenic. Further, pot experiments with Bengal gram and coriander plants showed enhanced growth (62–188% biomass and 90–277% length) and reduced arsenic accumulation (49–54%) in above ground parts of the plants. Therefore, biochar application was found to improve physico-chemical properties of soil, minimize arsenic contamination, and augment crop growth even in drought-stressed soils. The investigation suggests utilisation of cow manure for eco-friendly fabrication of nutrient-rich CEB, which could eventually promote sustainable agriculture and circular economy. With the increasing need for sustainable agricultural practices, the use of biochar could provide a long-term solution to enhance soil quality, mitigate the effects of climate change, and ensure food security for future generations. Future research should focus on optimizing biochar application across various soil types and climatic conditions, as well as assessing its long-term effectiveness.