New Delhi: The government on Thursday slashed the interest subsidy given to farmers on crop loans by one percentage point to two per cent for this fiscal, a move that is expected to bring down burden on the central exchequer by Rs311 crore.
According to the decision, taken by the Union Cabinet on Thursday, the government will pay 2% interest subsidy to banks, against 3% in the last fiscal, for granting short-term crop loan to farmers at a concessional rate of 7%, information and broadcasting minister Ambika Soni told reporters here.
The subvention is available for crop loans up to Rs3 lakh for one year and will be given to PSU banks, regional rural banks (RRBs) and cooperative credit institutions (CCIs) on their lending as well as to Nabard for refinancing RRBs and CCIs.
The financial implication due to the interest subsidy on farm loans will be Rs4,000 crore this fiscal compared to Rs4,311 crore in 2008-09, she said.
However, farmers who have been paying back their credit promptly would continue to get loans at 6%, which means an additional interest subsidy of 1%.
The government also revised upwards the target for loan disbursements to the agriculture sector to Rs3,25,000 crore for the current fiscal from Rs2,80,000 crore a year ago, of which Rs2,00,000 crore is estimated for the loans on crop.