Cabinet okays interest rebate of 1.5% on loans
NEW DELHI: The Union Cabinet on Wednesday approved an interest subvention (or a rebate) of 1.5% on short-term agriculture loans of up to ₹3 lakh provided by all lending institutions for the current and next financial years, a move aimed at ensuring easier credit flow to the farm sector, information and broadcasting minister Anurag Thakur said after a Cabinet meeting.
The 1.5% interest subvention will be provided to public and private sector banks, regional rural banks, small finance banks, cooperative banks and computerized primary agriculture credit societies for the financial year 2022-23 to 2024-25. “This increase in interest subvention support requires additional budgetary provisions of ₹34,856 crore for the period of 2022-23 to 2024-25 under the scheme,” a Cabinet statement said. During 2021-22, the interest subvention for similar shortterm farm loans was 2%. An additional interest subvention of 3% per annum also applied to farmers who make timely repayment of their loans. Farm loans attract an interest of 7%. The additional subvention brought down the effective rate of interest of interest to 4%.
Farmers routinely depend on credit to meet their cultivation costs, especially on inputs such fertilisers, seeds and pesticides etc. Adequate credit flow to the agriculture sector is critical to enable farmers to meet increasing costs of farming.
The 1.5% interest subvention approved by the Cabinet, chaired by PM Narendra Modi, will also apply to credit for allied agricultural activities such as animal husbandry, dairy, fisheries and bee keeping.
The move will “ensure financial health and viability of lending institutions, especially regional rural banks and cooperative banks”, the Cabinet statement added.
According to the RBI norms, to avail the interest subvention, banks are required to submit their claims on annual basis duly certified by their statutory auditors, within a quarter from the close of the year.