Cabinet nod for release of Rs 4868 cr as interest subvention to PSBs

The Union Cabinet today approved 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 to ensure short-term crop loans to farmers.

The decision also covers payments to the National Bank for Agriculture and Rural Development (NABARD) to be used 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 per cent per annum ( 5 per cent for prompt payers) with an upper limit of Rs. 3 lakhs on the principal amount during 2010-11.

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 lakh, at 7 percent per annum.

This Interest Subvention Scheme has been continued for 2010-11 for PSBs, RRBs and coopertive banks. In 2009-10, an additional subvention of one per cent was being provided to farmers who repay on time. This has been increased to two per cent 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 2010-11, the target for agricultural credit flow has been raised to Rs.3,75,000 crore from Rs.3,25,000 crore in 2009-10, the release added.

NNN