The government would increase the interest subvention on farm credit to 3 per cent in the 2011-12 financial year from the current 2 per cent, enabling the banking system to offer short-term credit to farmers at 4 per cent per annum, finance minister Pranab Mukherjee said today.
The government would further incentivise prompt repayment by farmers in the year 2011-12 by providing a further incentive of 3 per cent intense interest subvention, ie, loans will be available to farmers who pay on time at 4 per cent per annum," Mukherjee said.
The finance minister was speaking on the occasion of 106th Foundation Day Celebrations of Corporation Bank.
The government is currently providing interest subvention to all public sector banks, regional rural banks and cooperative banks for short-term crop loans up to Rs3 lakh, so as to ensure that short-term agriculture credit is available at 7 per cent per annum to farmers, he said.
Mukherjee said the government is now providing an additional 2 per cent interest subvention to those farmers who repay their short-term crop loans in time. Thus, the effective rate of short-term crop credit to farmers is 5 per cent per annum in 2010-11, he added.
The flow of bank credit to the agriculture sector in India is also expected to touch Rs4,75,000 crore in 2011-12 against the target of Rs3,75,000 crore in the current fiscal, Mukherjee said.