Cabinet may consider interest subvention in crop loans

The Union Cabinet is expected to consider a proposal in its next meeting to provide interest subvention of three per cent on timely repayment of short-term crop loans. The meeting is scheduled for tomorrow.

The proposal was first announced in the Union Budget of 2012-13, when the subvention was increased from two per cent to three per cent, making the effective rate of interest on those farmers who make timely repayment ( from within one year of disbursement) to just four per cent.

Without subvention, crop loans would attract seven per cent interest rate.

Meanwhile, the Cabinet is also expected to consider another proposal, mooted by the agriculture ministry, to lower the interest on crop loans that have been rescheduled into term loans by banks because of drought from 12 per cent to seven per cent.

The proposal was scheduled to be considered in a meeting of the empowered group of ministers (EGoM) on drought headed by Agriculture Minister Sharad Pawar, officials said.

However, as the second meeting of the EGoM on drought could not take place in the last one month, some officials said, the union cabinet could consider this proposal.

The farm ministry is believed to have mooted this proposal as extending the tenure of repayment of crop loans in drought-affected areas from yearly payment to three yearly payment has not made much impact because of high interest rate of around 12 per cent as against the normal seven per cent.