New Delhi: The government on Friday decided to release Rs4,868 crore to public sector lenders for providing concessional loans to farmers.
The decision, taken at a Cabinet meeting, will help lenders provide farmers short-term crop loan at 7% interest.
“The union cabinet today gave its approval for the release of Rs4,868 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 lenders would have given loans to farmers at 9%, had the subsidy of 2% not been provided by the government.
The government has, since 2006-07, been subsidising short term crop loans so as to ensure the availability of funds to farmers.
This interest subvention scheme has been continued for 2010-11 for public sector banks, regional rural banks and cooperative banks.
In 2009-10, an additional subvention of 1% was being provided to farmers who repaid on time.
This has been increased from 1% in 2009-10 to 2% in 2010-11. Thus, the effective rate of interest for such farmers will be 5% per annum.
The banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For 2010-11, the target for agricultural credit flow has been raised to Rs3,75,000 crore from Rs3,25,000 crore in 2009-10.