The government has decided to bring down the interest rate on short term credit for the farmers to seven per cent from the existing nine per cent or more. It has also decided to set up a committee for suggesting ways to provide agricultural credit to even those farmers who were currently not getting any loans from the institutional credit sources. NSS data showed just 27 per cent of cultivator households get formal credit, another 22 per cent get it from informal sources while the rest have no access at all.Announcing this in the budget speech, finance minister P. Chidambaram said that the seven per cent interest rate would be applicable on loans of less than Rs 3 lakhs. The National Bank for Agricultural and Rural Development (NABARD) would provide refinance to the lending institutions at economical rates for this purpose.The FM also announced that the banks would be asked to lend Rs 1,75,000 crores to the rural sector in 2006-07, besides adding 50 lakh more farmers to their portfolio. Besides, 3,85,000 more self-help groups (SHGs) would be linked to the banking sector for providing micro-finance. Already, about 801,000 SHGs were linked with banks for getting credit.The minister said he would ask NABARD to open a separate line of credit for financing farm production and investment activities through SHGs.He also announced that the farmers who had taken crop loans from the banking sector for kharif and rabi 2005-06, would get an amount equal to two percentage points of their liability (principal amount ceiling Rs 3 lakhs) deposited in their bank accounts before March 31, 2006. The government had provided Rs 1700 crores for this purpose.
