Union Cabinet said increase in interest subsidy support requires additional budget provision of ₹34,856 crore for the period of 2022-23 to 2024-25
Union Cabinet said increase in interest subsidy support requires additional budget provision of ₹34,856 crore for the period of 2022-23 to 2024-25
The Union cabinet, in a meeting chaired by Prime Minister Narendra Modi here on Wednesday, decided to restore the interest rate subsidy on short-term agricultural loans to 1.5% for all financial institutions, including including cooperative banks.
The Center said the increase in interest subsidy support requires an additional budget provision of ₹34,856 crore for the period of 2022-23 to 2024-25.
Explaining the reasons behind the move, Union Minister Anurag Thakur said the Reserve Bank of India had recently raised the repo rate and intervention was needed to maintain the interest rate on agricultural loans. short term at 7%.
He said the Centre’s support to banks for the interest subsidy program was stopped in May 2020, as banks were able to provide short-term agricultural loans at 7% on their own.
“Thus, an interest subsidy of 1.5% will be granted to credit institutions (public sector banks, private sector bank, small financial banks, regional rural banks, cooperative banks and computerized primary agricultural cooperatives directly assigned to commercial banks ) for the financial year 2022-23 to 2024-25 for lending short-term agricultural loans of up to ₹3 lakh to farmers,” a government statement read.
Ensuring the sustainability of the flow of credit
The Center said the increased interest subsidy will ensure the sustainability of credit flow in the agricultural sector as well as the financial health and viability of lending institutions, ensuring adequate agricultural credit in the rural economy.
“Banks will be able to absorb the increased cost of funds and will be encouraged to provide loans to farmers for short-term agricultural needs and allow more farmers to benefit from agricultural credit. It will also lead to job creation as short term agricultural loans are provided for all activities including animal husbandry, dairy farming, poultry, fisheries,” he said.
Farmers will continue to benefit from short-term agricultural credit at an interest rate of 4% per annum while repaying the loan on time, the Center said.
