The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday restored the interest subvention on short-term agriculture loans to 1.5 per cent for all financial institutions, including banks, small finance banks, regional rural banks and cooperative banks. The interest subvention has been approved for the financial year 2022-23 to 2024-25 for lending short-term agri-loans up to Rs 3 lakh to the farmers.
“The interest subvention of 1.5 per cent will be provided to lending institutions (public sector banks, private sector bank, small finance banks, regional rural banks, cooperative banks and computerised PACS directly ceded with commercial banks) for the financial year 2022-23 to 2024-25 for lending short term agri-loans upto Rs 3 lakh to the farmers.” PACS stands for primary agricultural credit society,” according to an official statement.
It added that this increase in interest subvention support requires additional budgetary provisions of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme.
“Increase in Interest Subvention will ensure sustainability of credit flow in the agriculture sector as well as ensure financial health and viability of the lending institutions especially regional rural banks & cooperative banks, ensuring adequate agriculture credit in rural economy,” the statement said.
Banks will be able to absorb increase in cost of funds and will be encouraged to grant loans to farmers for short term agriculture requirements and enable more farmers to get the benefit of agriculture credit. This will also lead to generation of employment since short term agri-loans are provided for all activities including animal husbandry, dairying, poultry, fisheries.
Farmers will continue to avail short term agriculture credit at interest rate of 4 per cent per annum while repaying the loan in time.
The government introduced interest subvention scheme (ISS), now renamed as Modified Interest Subvention Scheme (MISS), to provide short-term credit to farmers at subsidised interest rates. It was aimed at ensuring that the farmers have to pay a minimal interest rate to the bank.
Under this scheme, short-term agriculture loan up to Rs 3 lakh is available to farmers engaged in agriculture and other allied activities, including animal husbandry, dairying, poultry and fisheries, among others, at the rate of 7 per cent per annum. An additional 3 per cent subvention (prompt repayment incentive – PRI) is also given to the farmers for prompt and timely repayment of loans.
“Therefore, if a farmer repays his loan on time, he gets credit at the rate of 4 per cent per annum. For enabling this facility to the farmers, the Government of India provides interest subvention to the financial institutions offering this scheme. This support is 100 per cent funded by the Centre,” it added.
Recently, under the Aatmanirbhar Bharat campaign, over 3.13 crore farmers were issued new Kisan Credit Card (KCC) against the target of 2.5 crore. Special initiatives such as the KCC Saturation Drive for farmers enrolled under PM-KISAN scheme have also simplified the process and documentation involved for getting the KCC sanctioned, it said.
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