The Union government approved an interest subvention of 1.5% to lending institutions (public sector banks, private sector banks, small finance banks, regional rural banks, cooperative banks directly ceded with commercial banks) for the financial year 2022-23 to 2024-25 for lending short term farm loans up to Rs 3 lakh to the farmers at the rate of 7%.
It earmarked nearly Rs 35,000 crore towards the interest subsidy scheme under which banks and other financial institutions will provide short-term farm loans to agriculture and allied activities including dairy, poultry and fisheries.
This increase in interest subvention support requires additional budgetary provisions of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme, Union minister Anurag Thakur said.
To ensure that the farmers pay a minimal interest rate to the bank, the Centre brings, from time to time, interest subvention schemes to provide short-term credit to farmers at subsidised interest rates.
This will also lead to the generation of employment since short-term agriculture loans are provided for all activities including animal husbandry, dairying, poultry, and fisheries, an official statement said.