New Delhi: The government on Thursday cut the interest rate subsidy to 2% for this fiscal on farm loans given by the public sector banks from 3% last year.
A decision to this effect was taken by the Union Cabinet, information and broadcasting minister Ambika Soni told reporters.
The financial implication due to the interest subsidy on farm loans by PSU banks, regional rural banks and co-operative credit institutions were at Rs4,311 crore in 2008-09. It was estimated to be at about Rs4,000 crore in the current fiscal, the minister said.
Under the interest subvention scheme, the government will pay 2% interest subsidy to banks for granting short- term crop loan to farmers at a concessional rate of 7%.
In the Budget speech this year, finance minister Pranab Mukherjee had said, “I propose to continue the interest subvention scheme for short-term crop loans to farmers for loans up to Rs3 lakh per farmer at the interest rate of 7% per annum”.