Centre earmarks Rs18,276 cr for interest subsidy to farmers

07 Jul 2016

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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.

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