New Delhi: With RBI hiking the lending rate, the Union Cabinet on Wednesday earmarked Rs 34,856 crore towards the interest subvention scheme to help banks provide short term agriculture loans of up to Rs 3 lakh at a rate of 7 per cent.
Information and Broadcasting Minister Anurag Singh Thakur said the Cabinet has decided to restore interest subvention on short term agriculture loans to 1.5 per cent for all financial institutions.
The interest subvention of 1.5 per cent will be provided to lending institutions for financial years 2022-23 to 2024-25 for short term loans of up to Rs 3 lakh to the farmers.
The interest subvention support requires additional budgetary provisions of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme, an official statement said.
Thakur said the government’s support to banks for the interest subvention scheme was stopped in May 2020 as lenders were themselves able to provide short term agriculture loan at 7 per cent.
However, with the Reserve Bank of India (RBI) increasing the repo rate or short-term lending rate thrice by 140 basis points in recent months, it became necessary to compensate banks so that they can continue providing agriculture loans at 7 per cent.
Thakur also said the government has not let the fertiliser prices to rise despite the increase in global prices.