Release of Interest Subvention to Public Sector Banks (PSBs), Cooperative Banks (Short Term Cooperative Credit Structure-STCCS) and Regional Rural Banks (RRBs) and to NABARD for refinance to RRBs and

Since 2006-07 the Government has been providing interest subvention to farmers so that the short term crop loans are available to them @7% per annum upto a limit of Rs.3 lakh per farmer.

The Interest subvention is available to Public Sector Banks, Regional Rural Banks (RRBs) and Cooperative Credit Institutions (CCIs) on disbursements out of their own funds and to NABARD for concessional refinance to RRBs and CCIs.

For the year 2008-09 the Government is providing interest subvention to these banks @ 3% p.a. on their own funds, besides giving subvention to NABARD, and the total financial implication for the year 2008-09 has been estimated at Rs.4,311 crore.

For the year 2009-10, the target for flow of credit to agriculture sector has been revised from Rs.2,80,000 crore in 2008-09 to Rs.3,25,000 crore, of which the total short term crop loan disbursements by all banks is likely to be around Rs.2,00,000 crore.

For this year, the Government has decided to continue the ongoing Interest Subvention Scheme with the provision of interest subvention @ 2% to the banks on their own funds, besides giving concessional refinance through NABARD to RRBs and CCIs.

Refinance will be made available to RRBs at 4.5% and to CCIs at 4% so that they can lend to farmers at 7%.

The subvention would be available to farmers for a period of one year.

Besides this, the Government has also decided to give an additional interest subvention @ 1% to prompt paying farmers, which would bring down the rate of interest to 6% p.a. for them on their short term crop loan requirement.

The total cost of interest subvention for the year is estimated at Rs.4,000 crore.
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AKT/HS/SH/LV