Cabinet Approves Interest Subvention Of 1.5% On Short-Term Farm Loans

New Delhi: The Union Cabinet has approved to restore Interest Subvention on short-term agriculture loans to 1.5% for all financial institutions.

Thus, Interest Subvention of 1.5% will be provided to lending institutions (Public Sector Banks, Private Sector Bank, Small Finance Banks, Regional Rural Banks, Cooperative Banks, and Computerized PACS directly ceded with commercial banks) for the financial year 2022-23 to 2024-25 for lending short term agri-loans up to Rs 3 lakh to the farmers.

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.

An increase in Interest Subvention will ensure the sustainability of credit flow in the agriculture sector as well as ensure the financial health and viability of the lending institutions especially Regional Rural Banks & Cooperative Banks, ensuring adequate agriculture credit in the rural economy.

Banks will be able to absorb the 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 the generation of employment since short-term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, and fisheries.

Farmers will continue to avail short-term agriculture credit at an interest rate of 4% per annum while repaying the loan in time.