Against the backdrop of the agrarian unrest in some States, including in Mandsaur where six protesting farmers died in police firing last week, Union Cabinet on Wednesday decided to provide 5 per cent interest subsidy to farmers on short-term crop loans during the current fiscal. The short-term crop loan up to Rs3 lakh will be made available to the prompt payee farmers at 4 per cent interest rate as against the prevailing 9 per cent.
As per Interest Subvention Scheme for the current fiscal, the Centre will provide interest subvention of 5 per cent per annum to all prompt payee farmers for loan up to one year. The loan amount cannot exceed Rs3 lakh. In case farmers do not repay their loans in time, they will only be eligible for interest subvention of 2 per cent instead of 5 per cent. All short-term crop loan accounts will be linked to Aadhaar from the current year.
That apart, farmers will also get loans for post-harvest storage of their produce at a subsidised interest rate, the Central Government has approved an interest subvention of 2 per cent, ie an effective interest rate of 7 per cent for loans up to six month. To provide relief to farmers affected by natural calamities, the Government has decided to give 2 per cent interest subsidy for first year on the restructured amount. The Cabinet has approved the total expenditure of Rs20,339 crore in the current financial year (2017-18) as interest subsidy on short-term crop loans.
Uttar Pradesh and Maharashtra have already announced such waiver.
Interest Subvention Scheme means the subsidy on the interest by Government loan. 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 Interest Subvention 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.
“Since the crop insurance under Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans, farmers would stand to benefit from both farmer-oriented initiatives of the Government, by accessing the crop loans,” said a Government officer.
“The loans are available to small and marginal farmers holding Kisan Credit Cards (KCC) at interest subvention of 2 per cent on such storages for a period of up to six months. This will help the farmers to sell when they find the market is buoyant, and avoid distress sale. It is, therefore, needful for the small and marginal farmers to keep their KCCs alive,” he added.
The scheme has been running since 2006-07. Under this, farmers can avail concessional crop loans of up to Rs3 lakh at 7 per cent interest. It also provides for an additional subvention of 3 per cent for prompt repayment within a period of one year from the date of advance. As a measure to check distress sale, post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) are available for up to 6 months for KCC-holding small and marginal farmers. During the year 2016-17, the volume of short-term crop loans stood at Rs6,22,685 crore, surpassing the target of Rs6,15,000 crore.
As an interim measure, the Reserve Bank of India last month had asked the banks to continue giving the discount on interest on short-term crop loans during the current fiscal. For 2017-18, the target of agriculture credit has been raised to Rs10 lakh crore, from Rs9 lakh crore in 2016-17.