The Union Cabinet today gave its approval for the release of a sum of Rs.4,868 crore (subject to actuals) as interest subvention to Public Sector Banks (PSBs), Regional Rural Banks (RRBs) and Cooperative Banks and to NABARD for refinance to RRBs and Cooperative Banks 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 percent per annum ( 5 percent for prompt payers) with an upper limit of Rs. 3 lakhs on the principal amount during 2010-11.
BACKGROUND:
The Government has since 2006-07 been subsidizing short term crop loans to farmers in order to ensure the availability of crop loans to farmers for loans up to Rs. 3.00 lakh, at 7 percent per annum. This Interest Subvention Scheme has been further continued for 2010-11 for Public Sector Banks, Regional Rural Banks and Cooperative Banks. In the year 2009-10, an additional subvention of one percent was being provided to farmers who repay on time. This has been increased from one percent in 2009-10 to two percent in 2010-11. Thus, the effective rate of interest for such farmers will be five per cent per annum.
The banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2010-11, the target for agricultural credit flow has been raised to Rs.3,75,000 crore from Rs.3,25,000 crore in the year 2009-10.
