Modi Govt extends interest subsidy on short-term crop loans to farmers; prompt repayers to get loan at 4%

Farmers will continue to get a short-term loan of up to Rs 3 lakh at a subsidised interest rate of 7 percent, and prompt repayers will get it at 4 per cent as the government on Wednesday extended the subsidy to banks for 2017-18.

The Interest Subvention Scheme for 2017-18 has been approved in the Cabinet meeting, headed by Prime Minister Narendra Modi, on Wednesday.

“The Cabinet has approved the total expenditure of Rs 20,339 crore in the current financial year as interest subsidy on short-term crop loans,” a senior government official said.

The short-term crop loan of up to Rs 3 lakh will continue to be made available to the prompt payee farmers at 4 per cent interest rate only, the official said.

Crop loans upto Rs. 3 lakhs made available to the prompt payee farmers at 4% interest rate only #Cabinet

— ANI (@ANI_news) June 14, 2017

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 farmers protest in several parts of the country, more particularly in Madhya Pradesh demanding farm loan waiver. Uttar Pradesh and Maharashtra have already announced such waiver.

Under the scheme, a subvention of 2 per cent per annum is provided for short-term crop loan of up to Rs 3,00,000 per farmer, provided the lending institutions make available short-term credit at the ground level at 7 per cent per annum to farmers.

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An additional interest subvention of 3 per cent per annum is available to the “prompt payee farmers”.

For 2017-18, the target of agriculture credit has been raised to Rs 10 lakh crore, from Rs 9 lakh crore in 2016-17.