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Union Cabinet approves restoration of Interest subvention on Short Term Agriculture Loan

BNE News Desk


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The union cabinet approves restoration of interest subvention on short term agriculture loans to 1.5% for all financial institutions.

Union Cabinet approves restoration of Interest

A budget of Rs 34,856 crore has been added for the period of 2022-23 to 2024-25 under the scheme. The decision is expected to ensure adequate credit flow in agriculture in the farming sector.

The Interest Subvention of 1.5% will be provided to lending institutions for the financial year 2022-23 to 2024-25 for lending short term agri-loans upto Rs 3 lakh to the farmers.

Benefits:

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

Banks will be able to soak up an 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 in turn will lead to generation of employment since short term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, fisheries.

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

Under this scheme, short term agriculture loan upto Rs. 3.00 lakh is available to farmers engaged in Agriculture and other allied activities including Animal Husbandry, Dairying, Poultry, fisheries etc. at the rate of 7% p.a.

The country has over the years witnessed drastic increase in the interest rate and lending rates for the financial institutions especially Cooperative Banks and Regional Rural Banks.

It is to be noted that the Government has reviewed the rate of Interest subvention provided to these Financial Institutions. It is expected that this will ensure adequate credit flow in the agriculture sector to the farmer as well as ensure financial health of lending institutions.

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BNE News Desk