core sector communique

Interest subvention to Public Sector Banks, Cooperative Banks, RRBs, NABARD for providing short term crop loan to farmers

The Union Cabinet today gave its approval for the following: (i) To continue interest subvention to Public Sector Banks (PSBs), Regional Rural Banks (RRBs), Cooperatives Banks and NABARD to enable them to provide short-term crop loans up to Rs.3 lakh to farmers at 7% p.a. during the year 2012-13. (ii) To provide additional interest subvention of 3% p.a. to those farmers who repay on time, i.e. within one year of disbursement, their short-term crop loans taken during the year 2012-13. (iii) To permit the release of Rs.10,901 crore as interest subvention for 2012-13 of which Rs.3267 crore subvention to NABARD for refinance to Cooperatives Banks and RRBs and Rs.7634 crore to Public Sector Banks, RRBs & Cooperative Banks for subvention on their own funds. (iv) To provide interest subvention to small and marginal farmers having Kisan Credit Card for loan against negotiable warehouse receipts for post harvest at 7% p.a. interest for a period of six months i.e. on the same rates as applicable for crop loans as given in the para (i) above. (v) To permit the release of Rs.442 crore as interest subvention to small and marginal farmers having Kisan Credit Card against negotiable warehouse receipts, for post-harvest. The Government of India 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 upto Rs.3 lakh at 7% p.a. This interest Subvention Scheme has been further continued for 2012-13 for PSBs, RRBs and Cooperative Banks. In the year 2009-10, an additional subvention of 1% was provided to farmers who repay their loans on time. This has been increased from 2% in 2010-11 to 3% in 2011-12 and 2012-13. Thus, the effective rate of interest for such scheme for 2012-13 is Rs.10,901 crore. Banks have been consistently meeting the target set for agriculture credit flow in the past years. For the year 2012-13, the target for agricultural credit flow has been raised to Rs.5,75,000 crore from Rs,4,75,000 crore in the year 2011-12.