Govt cuts farm loan interest subsidy to 2%

The government today cut the interest rate subsidy to two per cent for this fiscal on farm loans given by the public sector banks from three per cent last year.

A decision to this effect was taken by the union cabinet, information and broadcasting minister Ambika Soni told reporters.

The financial implication due to the interest subsidy on farm loans by PSU banks, Regional Rural Banks and co-operative credit institutions were at Rs 4,311 crore in 2008-09. It was estimated to be at about Rs 4,000 crore in the current fiscal, the minister said.

Under the interest subvention scheme, the government will pay 2 per cent interest subsidy to banks for granting short- term crop loan to farmers at a concessional rate of 7 per cent.

In the Budget speech this year, Finance Minister Pranab Mukherjee had said, "I propose to continue the interest subvention scheme for short-term crop loans to farmers for loans up to Rs 3 lakh per farmer at the interest rate of 7 per cent per annum".