Government to release Rs4,868 crore to banks for concessional farm credit

The government has approved the release of Rs4,868 crore as interest subvention to public sector banks (PSBs), regional rural banks (RRBs) and cooperative banks as also NABARD for refinance to RRBs and cooperative banks for lending at concessional rate to farmers.

This is to ensure that farmers get short-term crop loans at a concessional rate of 7 per cent per annum (5 per cent for prompt payers), an official release said.

The release of the amount would, however, be subject to actual targets achieved, it added.

The farm loans have an upper limit of Rs3 lakh on the principal amount. For the year 2010-11, the government has raised the target for agricultural credit flow to Rs3,75,000 crore from Rs3,25,000 crore in the year 2009-10.

The government has since 2006-07 been subsidising short-term crop loans to farmers through an interest subvention scheme. Public sector banks, regional rural banks and cooperative banks will continue the concessional lending in the 2010-11 financial year also.
The interest subvention has been raised from the original two percentage points by another one percentage point for prompt payers in the year 2009-10.

This has now been increased to two percentage points for the 2010-11 fiscal. Thus, the effective rate of interest for such farmers will be five per cent per annum.

The banks have been consistently meeting the targets set for agriculture credit flow in the past few years, the release added.