Cabinet okays 5% subsidy on short-term farm loan interest

New Delhi : In a bid to boost agricultural productivity, the Union Cabinet on Wednesday approved a five per cent subsidy on farm loan interest for 2017-18 on short-term agricultural credit of up to Rs 3 lakh payable within a year. The government has earmarked Rs 20,339 crore for this purpose. The Centre will provide interest subvention of five per cent per annum to all prompt payee farmers for such loans raised during 2017-18.

“The Cabinet chaired by Prime Minister Narendra Modi approved the Interest Subvention Scheme (ISS) for farmers for 2017-18 to help them getting short-term crop loan up to Rs 3 lakh payable within one year at only four per cent per annum rate of interest,” an official statement said here.

“Farmers will thus have to effectively pay only four per cent interest. In case farmers don’t repay their loan in time, they will be eligible for interest subvention of two per cent instead of five per cent,” it said.

The interest subvention will be given to public and private banks, cooperative banks and regional rural banks on the use of own funds and to the National Bank For Agriculture and Rural Development (NABARD) for refinance to these rural and cooperative banks.

The Interest Subvention Scheme will continue for a year and implemented by NABARD and the Reserve Bank of India (RBI), it said. The scheme has been running since 2006-07. During 2016-17, the volume of short-term crop loans raised stood at Rs 6,22,685 crore.

Moreover, in order to give relief to small and marginal farmers who would have to borrow at 9 per cent interest for post-harvest storage of farm produce, the government has approved an interest subvention of 2 per cent