In an attempt to further subsidise short-term crop loan to farmers, the Union Cabinet on Friday approved release of Rs 4,868 crore to public sector banks. The decision will ensure that farmers, in general, receive short-term crop loan at 7% per annum (5% for prompt payers) with an upper limit of Rs 3 lakh on the principal amount during 2010-11.
"The Union Cabinet today gave its approval for the release of Rs 4,868 crore as interest subvention to Public Sector Banks (PSBs), Regional Rural Banks (RRBs), Cooperative Banks and NABARD for refinance to RRBs at concessional rates to reimburse the amount of interest subvention to ensure that the farmer, in general, should receive short-term crop loan at 7% per annum this fiscal," the government said in a statement.
The government has been subsidising since 2006-07 short-term crop loans to farmers in order to ensure the availability of crop loans to farmers for loans up to Rs 3 lakh, at 7% per annum. This Interest Subvention Scheme will continue this fiscal for PSBs, RRBs and Cooperative Banks.
"In the year 2009-10, an additional subvention of one percent was being provided to farmers who repay on time. This has been increased from one percent in 2009-10 to two percent in 2010-11. Thus, the effective rate of interest for such farmers will be five per cent per annum," said a statement issued by the government.
The banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For this fiscal, the target for agricultural credit flow has been raised to Rs 3,75,000 crore from Rs.3,25,000 crore in the last one.