The Union Cabinet today approved continuation of the interest subvention scheme to provide short-term crop loans to farmers in order to ensure the availability of crop loans at affordable rates to farmers for loans upto Rs. 3 lakh at the rate of 7 percent per annum.

This scheme has already been extended to crop loans borrowed from private sector scheduled commercial banks in respect of loans given within the service area of the branch concerned.

An additional subvention of 3 percent is being provided to those farmers who repay their loans on time. Thus, the effective rate of interest for such farmers will be 4 percent per annum. The estimated budgetary implication of this scheme for 2013-14 is Rs. 15,385 crore.

The Government will also provide interest subvention at 7 percent to small and marginal farmers having Kisan Credit Card loans against Negotiable Warehouse Receipts for post harvest, on the same rates as those available for crop loan, for another six months. The estimated additional budgetary implication of this feature would be Rs. 264 crore.

Banks have been consistently meeting the target set for agricultural credit flow in the past years. For the year 2013-14, the target for agricultural credit flow has been raised to Rs. 7 lakh crore from Rs. 5.75 lakh crore in the year 2012-13.

Interest subvention scheme continues: subsidised short-term farm loans with a repayment-linked incentive and extended coverage. Continuation of the interest subvention scheme provides subsidised short-term crop loans through PSBs, private banks, cooperative banks, RRBs and via NABARD refinance, extends coverage to private bank branch service areas, maintains the principal subvention rate for eligible short-term crop loans, and adds a timely-repayment incentive reducing effective interest for punctual borrowers; it also temporarily extends subvention to Kisan Credit Card loans against Negotiable Warehouse Receipts for post-harvest finance and notes the scheme's budgetary implication and raised agricultural credit flow target.