Cabinet approves interest subvention on short-term crop loans; Here's are its features
Union Cabinet has approved an interest subvention scheme for farmers short term loan aggregating up to Rs 3 lakh borrowed during the year 2017 - 18. RBI and NABARD will implement the scheme.
- Interest subvention scheme will continue for one year
- Government will be provide about Rs 20,339 crore as interest subvention
- RBI and NABARD can implement the scheme
The Union Cabinet chaired by PM Narendra Modi on Wednesday approved the interest subvention scheme (ISS) for farmers in the current financial year 2017-18.
Cabinet said, “Objective of the scheme is to make available at ground level, agricultural credit for short term crop loans at an affordable rate to give a boost to agricultural productivity and production in the country.”
Interest subvention scheme will continue for one year and it will be only implemented by the Reserve Bank of India and NABARD.
The scheme will be given to public sector banks (PSBs), private banks, co-operative banks and regional rural banks on use of own funds.
Here are the features of the scheme
The central government will sanction interest subvention of 5% to farmers for short term crop loan up to one year for loan amounting to Rs 3 lakhs borrowed during the year 2017-18.
Farmers will then effectively pay only 4% as interest. In case, they fail to repay short term crop loan in time then farmers would be eligilble for interest subvention of 2% as against 5% available above.
Central government will be providing approximately Rs 20,339 crore as interest subvention for the year.
To provide further relief to small and marginal farmers who would borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e. an effective interest rate of 7% for loans up to 6 months.
For farmers affected by natural calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount.
As per Cabinet, this institutional credit will help in delinking the farmers from non-institutional sources of credit, where they are compelled to borrow at usurious rates of interest.
Since the crop insurance under Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans, the farmers would stand to benefit from both farmer oriented initiatives of the Government, by accessing the crop loans.
An important initiative of the government is to market reforms, with a view to ensuring that the farmers benefit from remunerative prices for their produce in the market.
Government is keen in improving income of the farmers. The credit from institutional sources will complement all such government initiatives like Soil Health Card, Input Management, Per Drop More Crop in Pradhan Mantri Krishi Sichai Yojana (PMKSY), PMFBY, e-NAM, etc.
During the year 2016-17, the volume of short term crop loan lent stood at Rs 6,22,685 crore, surpassing the target of Rs. 6,15,000 crore.