Scheme will continue for one year, be overseen by NABARD
Amid growing protests over farm sector distress, the Cabinet has approved the extension of the interest subvention scheme for farmers to 2017-18. Short-term crop loans up to Rs. 3 lakh will receive a subvention of 5%, effectively reducing the rate for farmers to 4%.
The government has earmarked a sum of Rs. 20,339 crore for this. The interest subvention scheme will continue for one year and will be implemented by the National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India.
“The Central government will provide interest subvention of 5% per annum to all prompt payee farmers for short-term crop loan up to one year for loan up to Rs. 3 lakh borrowed by them during the year 2017-18,” the government said in a statement. “Farmers will thus have to effectively pay only 4% as interest.”
Farmers unable to repay the short-term crop loans on time will receive an interest subvention of 2%.
The scheme has been running since 2006-07, under which farmers are eligible for interest subvention of 2% for crop loans of up to Rs. 3 lakh.
“Just an extension of the scheme would not make much of a difference unless the rate of subvention is substantially increased,” D.K. Srivastava, chief policy adviser at EY India said. “Since the distress is caused by an income failure, this would have a very small effect on the matter.”
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