Farmers will continue to get short-term loan of up to Rs 3 lakh at a subsidized interest rate of seven per cent, and prompt repayers will get it at four per cent as the government extended the subsidy to banks for 2017-18.
Prime Minister Narendra Modi has approved the Interest Subvention Scheme for 2017-18 in the Cabinet meeting.
The Government has earmarked a sum of Rs. 20,339 crore for this purpose. According to a release by the Cabinet, the move will help farmers getting short term crop loans up to Rs. 3 lakh payable within one year at only 4 per cent per annum.
The interest subvention will be given to public sector banks (PSBs), private sector banks, cooperative banks and regional rural banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative banks, the release added.
The scheme will continue for one year and it will be implemented by NABARD and RBI.
"The 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," the Centre added.
As an interim measure, the Reserve Bank last month had asked the banks to continue giving the discount on interest on short-term crop loans during the current fiscal.
The Cabinet decision to continue the interest subvention comes at a time when there are farmer’s protests in several parts of the country, more particularly in Madhya Pradesh demanding farm loan waiver. Uttar Pradesh and Maharashtra have already announced such waiver.
For 2017-18, the target of agriculture credit has been raised to Rs 10 lakh crore, from Rs 9 lakh crore in 2016-17.