Centre earmarks Rs18,276 cr for interest subsidy to farmers
07 July 2016
The centre has earmarked Rs18,276 crore for financing interest subvention by public and private sector banks, cooperative banks, regional rural banks and NABARD for providing short-term crop loan to farmers.
The union cabinet chaired by Prime Minister Narendra Modi approved the Interest Subvention Scheme for farmers for the year 2016-17 on Tuesday.
The decision will help farmers in getting short-term crop loans of up to Rs3 lakh, payable within one year, at as low interest rate as 4 per cent per annum.
Government will provide interest subvention of 5 per cent per annum to all farmers for short term crop loan up to one year for loans up to Rs. 3 lakhs borrowed by them during the year 2016-17.
Farmers will thus have to effectively pay only 4 per cent as interest. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of only 2 per cent as against the 5 per cent available on prompt repayment.
Government will give approximately Rs18,276 crore as interest subvention for 2016-17.
In order to give relief to small and marginal farmers who would have to borrow at 9 per cent for the post harvest storage of their produce, the central government has approved an interest subvention of 2 per cent, ie, an effective interest rate of 7 per cent for loans up to 6 months.
To provide relief to the farmers affected by natural calamities, the interest subvention of 2 per cent will be provided to banks for the first year on the restructured amount.