Cabinet approves sops for farmers; offers crop loans at 4%

The union cabinet today approved an interest subvention scheme (ISS) offering short-term crop loans of up to Rs3 lakh to farmers, at an interest rate of 4 per cent, for the year 2017-18. The government has earmarked Rs20,339 crore for this purpose.

The interest subvention will be given to public sector banks (PSBs), private sector banks, cooperative banks and regional rural banks (RRBs) on use of own funds and to Nabard for refinance to RRBs and cooperative banks.

As per the scheme, the central government will provide interest subvention of up to 5 per cent per annum to all prompt payee farmers for short term crop loans of up to Rs3 lakh of one year tenure during the year 2017-18.

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 2 per cent as against 5 per cent available on prompt repayment.

The central government will provide approximately Rs20,339 crore as interest subvention for 2017-18.

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 on loans of up to 6 months tenure.

Besides, to provide relief to farmers affected by natural calamities, the government will provide interest subvention of 2 per cent to banks for the first year on the restructured loans.

In case farmers do not repay the short term crop loan in time they would not be eligible for interest subvention of 2 per cent.

The interest subvention scheme will continue for one year and it will be implemented by Nabard and the Reserve Bank of India (RBI).

The scheme, approved by the cabinet at a meeting chaired by Prime Minister Narendra Modi, is intended to make available agricultural credit for short term crop loans at an affordable rate so as to boost agricultural productivity and production in the country.