The finance ministry has told all public sector banks (PSBs) to provide crop loans to drought-hit farmers at a concessional seven per cent rate this year, despite loan restructuring. And, those prepaying the restructured loan would be eligible for an additional interest subvention of three per cent.
Short-term loans (one-year tenure) of farmers affected by deficit rainfall were rescheduled to allow them to repay during the medium to long term (three to five years). The interest subvention provided by the government is not applicable if the loan is restructured by the bank.
The agriculture ministry had pitched for a concessional rate through the tenure of the loan. Instead, as a one-off measure, the government decided to give a subvention in the current year, while from next year till the end of the loan term, the farmer would have to pay at the normal rate, which could be around 12 per cent for a five-year loan.
The interest subvention scheme is being implemented by the government since 2006-07 for short-term crop loans up to Rs 3 lakh for a period of a year. An additional interest subvention of one per cent for timely repayment was introduced in 2009-10. It was increased to two per cent in 2010-11 and three per cent in 2011-12. The government had announced continuation of the scheme for 2012-13 as well.
The move should benefit farmers in the drought-hit areas of Maharashtra, Gujarat, Rajasthan and Karnataka, among others. In June, the government had announced a Rs 2,000-crore relief package for drought-hit areas and a subsidy on diesel.
The banking system is covering about half the farmers in the country. Agricultural credit in 2011-12 was Rs 509,040 crore. Of 63 million farm loan accounts financed in 2011-12, about 400,000 belonged to small and marginal farmers. A target of disbursal of Rs 575,000 crore as agricultural credit in 2012-13 has been fixed.