Farmers borrowing crop loans from private banks will also get government’s interest subvention scheme, finance minister P Chidambaram said in his 2013 Budget speech.
At present, farmers used to get crop loans at a subsidised 4% a year rate from public sector banks, regional banks and cooperative banks if they repay in time.
Farmers who repay loans in time, gets an additional 1% interest subvention from the government over and above 2% general subvention, making the actual borrowing rate 4% a year.
Extending the scheme to private banks will help this set of lenders to achieve their priority sector and direct farm loan targets far more easily. Banks are told to lend 18% of their adjusted net bank credit of last fiscal to the farm sector as a sub target of the total priority target of 40%.
The finance minister has also raised the annual farm loan target by 22% to Rs 7 lakh crore in 2013-14 from 5.75 lakh crore in 2012-13.