Centre Extends Interest Subsidy on Short-Term Crop Loans

The short-term loan of up to Rs 3 lakh will be made available to the prompt payee farmers at 4% interest.

UP farmers are disheartened after a sandstorm ruined their prospects of bulk-exporting mangoes to Iran. (Photo: AP)

Farmers will continue to get 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 percent as the Central 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.

Senior Government Official

Also Read: Fiscal Slippage Risk Has Risen With Farm Loan Waivers: RBI Guv

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

As an interim measure, the Reserve Bank of India in May had asked the banks to continue giving discount on interest on short-term crop loans during the current fiscal.

The Cabinet’s decision to continue the interest subvention comes at a time when there are farmers’ protests in several parts of the country, more so in Madhya Pradesh demanding farm loan waiver.

Uttar Pradesh and Maharashtra have already announced such waivers.

Also Read: Farm Loan Waivers to Touch 2% of GDP in Run-Up to 2019 Polls

Under the scheme, a subvention of 2 percent 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 percent per annum to farmers.

An additional interest subvention of 3 percent 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.

Also Read: States Have to Bear Farm Loan Waivers From Own Coffers: FM Jaitley

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