Cabinet approves 1.5% interest assistance on agricultural loan

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An increase in the interest subsidy will ensure the sustainability of the flow of credit in the agricultural sector.

New Delhi:

The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday approved an interest subsidy of 1.5% per annum on short-term agricultural loans up to Rs 3 lakh.

An interest subsidy of 1.5% will be granted to credit institutions (Public Sector Banks, Private Sector Banks, Small Financial Banks, Regional Rural Banks, Cooperative Banks and Computerized PACS directly transferred to commercial banks) for the financial year 2022-23 to 2024-25 for lending short-term agricultural loans of up to Rs 3 lakh to farmers, according to an official statement released after the cabinet meeting.

This increase in interest subsidy support necessitates additional budgetary provision of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme.

“The decision has been taken to ensure adequate flow of credit in the agricultural sector,” Union Information and Broadcasting Minister Anurag Thakur told a press briefing after the meeting. of the firm.

An increase in the interest subsidy will ensure the sustainability of credit flow in the agricultural sector as well as the financial health and viability of lending institutions, especially regional rural banks and cooperative banks, ensuring adequate agricultural credit in the agricultural sector. rural economy.

Banks will be able to absorb the increased cost of funds and will be encouraged to provide loans to farmers for short-term agricultural needs and enable more farmers to benefit from agricultural credit. It will also lead to job creation as short term agricultural loans are provided for all activities including livestock, dairy, poultry and fisheries.

Farmers will continue to benefit from short-term agricultural credit at an interest rate of 4% per annum while repaying the loan on time.

Ensuring the availability of hassle-free credit at a cheaper rate for farmers has been the top priority of the Indian government. Accordingly, the Kisan credit card system has been introduced for farmers, to enable them to purchase agricultural products and services on credit at any time, according to an official statement issued by the Ministry of Agriculture and Welfare. – be farmers.

To ensure that farmers have to pay a minimum rate of interest to the bank, the Government of India introduced the Interest Subsidy Scheme (ISS), now renamed as Modified Interest Subsidy Scheme (MISS), to provide short-term credit to farmers at a subsidized interest rate. rates.

Under this scheme, short term agricultural loan of up to Rs 3.00 lakh is available for farmers engaged in agriculture and other related activities including animal husbandry, dairy, poultry , fishing, etc. at the rate of 7% per annum.

An additional 3 percent subsidy (Rapid Repayment Incentive – PRI) is also provided to 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 year.

To enable this facility to the farmers, the Government of India provides interest subsidy (IS) to the financial institutions offering this scheme. This support is 100% funded by the Center, it is also DA&FW’s second largest program in terms of budget expenditure and beneficiary coverage.

Recently, under the Aatmanirbhar Bharat campaign, more than 3.13 Crore farmers received new Kisan Credit Card (KCC) against the target of 2.5 Crore. Special initiatives such as the KCC Saturation Drive for farmers registered under the PM-KISAN program have also simplified the process and documentation needed to obtain KCC sanction.

In view of the changing economic scenario, particularly the increase in interest rates and lending rates for financial institutions, especially cooperative banks and regional rural banks, the government has revised the subsidy rate for interest granted to these financial institutions. This is expected to ensure an adequate flow of credit into the agricultural sector for the farmer as well as ensure the financial health of lending institutions.

To address this challenge, the Indian government has proactively decided to reinstate the interest rate subsidy on short-term agricultural loans at 1.5% for all financial institutions.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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