Interest subvention to Public Sector Banks, Private Sector Banks, Cooperative Banks, Regional Rural Banks and NABARD for providing short term crop loan to farmers

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New Delhi,
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Interest Subvention Scheme for farmers for the year 2016-17. The Government has earmarked a sum of Rs. 18,276 Crore for this purpose. This will help farmers getting short term crop loan payable within one year up to Rs. 3 lakhs at only 4% per annum.
The salient features of the scheme are as follows: 

  • The Central Government will provide interest subvention of 5 per cent per annum to all farmers for short term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them during the year 2016-17. Farmers will thus have to effectively pay only 4% as interest. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.
  • The Central Government will give approximately Rs 18,276 crores as interest subvention for 2016-17.
  • In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e an effective interest rate of 7% for loans upto 6 months.
  • To provide relief to the farmers affected by Natural Calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount.
  • In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.

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