Lok Sabha Question No. 1546 (UNSTARRED), answered on 2017-07-25
Subject: Interest Subvention Scheme
Ministry: AGRICULTURE AND FARMERS WELFARE
Asked by: JAYSHREEBEN  PATEL

## GOVERNMENT OF INDIA MINISTRY OF AGRICULTURE AND FARMERS WELFARE DEPARTMENT OF AGRICULTURE, COOPERATION AND FARMERS WELFARE

## LOK  SABHA UNSTARRED QUESTION NO.1546

TO BE ANSWERED ON THE  25 TH  JULY, 2017

## INTEREST SUBVENTION SCHEME

1546.  SHRIMATI JAYSHREEBEN PATEL:

Will  the  Minister  of  AGRICULTURE  AND  FARMERS  WELFARE      ‡ãðŠãäÓã एवं  कसान कयाण ½ãâ¨ããè be pleased to state:

- (a) whether the Government is operating a scheme to disburse short term crop loan at the rate of 7% and 3% interest subvention is also being provided thereunder to the farmers who repay crop loan in time and if so, the details thereof along with the limit of finance of crop loan given to the farmers;
- (b) whether the financial institutes are entitled to 2% interest subvention for their own funds for short term crop finance and if so, the details thereof;
- (c) whether huge funds remain invested in the agricultural credit by way of principal of  interest  and  if  so,  the  details  thereof  and  the  manner  in  which  the  Government  is going  to  help  the  District  Co-operative  Banks  and  Primary  Agriculture  Cooperative Societies so that their finances are strengthened;
- (d) whether the Government is aware that the claims of farmers are not paid in time thereby depriving the institutes to utilise their funds for further use; and
- (e) whether  the  Government  is  contemplating  to  sanction  the  claim  of  interest subvention at the earliest or  provide  90% of the claim amount in advance in order to reduce the financial burden of interest and if so, the details thereof?

## ANSWER

MINISTER OF  STATE IN THE  MINISTRY OF  AGRICULTURE AND  FARMERS  WELFARE

‡ãðŠãäÓã एवं  कसान  कयाण ½ãâ¨ããÊã¾ã  ½ãñâ  Àã·¾ã  ½ãâ¨ããè (  SHRI PARSHOTTAM RUPALA)

- (a) & (b): Yes, Madam. The Government has been implementing Interest Subvention Scheme since 2006-07.  Under the Scheme, interest subvention of 2% per annum is provided to Public Sector Banks, Private Sector Scheduled Commercial Banks (in  respect  of  their  rural  and  semi-urban  branches),  Cooperative  Banks  and  Regional Rural Banks on their own funds used for short term crop loans upto Rs.3.00 lakh per farmer  provided  the  lending institutions make  available short term credit at the ground

level  at  7%  per  annum  to  farmers.  Farmers  are  provided  with  3%  additional  interest subvention for the short term crop loan of upto Rs.3.00 lakh for a maximum period of one  year  for  prompt  repayment  on  or  before  the  due  date  fixed  by  the  financial institutions.  Thus, farmers, who promptly repay their crop loans as per the repayment schedule fixed by the financial institutions, are extended loans at an effective interest rate of 4% per annum.

(c): The  Government  announces  annual  agriculture  credit  flow  targets  towards production credit (short term crop loan) and investment credit (term loan).  During the past  three  years  i.e.  2014-15,  2015-16  and  2016-17,  the  total  agriculture  credit  flow targets  have  been  Rs.8.00  lakh  crore,  Rs.8.50  lakh  crore  and  Rs.9.00  lakh  crore respectively  and  actual  achievement  of  ground  level  credit  flow  has  surpassed  the targets.  For  2017-18,  the  annual  agriculture  credit  target  has  been  fixed  at  Rs.10.00 lakh crore.

The  following  measures  have  been  taken  by  NABARD  to  provide  financial support to strengthen finances of Cooperative Banks:-

(i)  In  order  to  improve  the  capital  of  the  banks,  NABARD  has  issued  guidelines  to achieve 9% Capital to Risk (Weighted) Assets Ratio (CRAR) stipulated by RBI and has also urged State Governments to provide capital support to cooperative banks in case the banks fall short in their capital mobilization.

(ii)    The  Government  has  approved an  assistance  package for  23  unlicensed  District Central  Co-operatives Banks (DCCBs) to strengthen their financial position to  enable them to secure RBI license and a total assistance of Rs 2560.29 crore was released to these banks with State Government share of Rs.1998.22 crore and Central Government share of Rs.562.07 crore. As a result, 20 DCCBs improved their CRAR and received license from RBI.

(iii)    NABARD is providing refinance to Cooperative Banks for financing short term {(Seasonal Agricultural Operations (SAO) } loans to farmers as per the funds allocated by Government of India from time to time.

(iv)   In view of banks facing liquidity constraints due to  reasons like drought conditions and increased demand, withdrawal of deposits by Central Cooperative Banks (CCBs), etc. NABARD  has  provided additional short-term refinance for SAO  to State Cooperative  Banks  over    and    above  normal  short  term  (SAO)  limit  during  the  year 2016-17.

(v)  On lines with RBI instructions, Cooperative Banks were advised by NABARD to act with empathy and consider restructuring and granting fresh loans without waiting for the receipt of the insurance claims.

(vi)    Refinance for Medium Term conversion for short-term loan on account of natural calamity is provided to Cooperative Banks making farmers eligible for fresh short term (SAO) finance.

(vii)  Refinance support to Cooperative Banks is also provided for financing short term (Weavers)/short term-other purposes.

(viii)  Long Term/ Medium Term loan is also provided to enable Cooperative Banks to provide loans  to  farmers  for  undertaking  all  eligible  agriculture  and  allied  activities  such  as  Dairy, Poultry, Minor Irrigation, Farm Mechanization, Land Development, Plantation & Horticulture, etc.

(d) & (e): The National Bank for Agricultural and Rural Development (NABARD) and Reserve  Bank  of  India  (RBI)  raise  claims  with  the  Government  under  its  Interest Subvention Scheme (ISS), wherein interest subvention of 2% per annum is provided to Public/Private  Sector  banks  (PSBs),  Cooperative  Banks  and  Regional  Rural  Banks (RRBs) on their own funds used for short-term crop loan up to Rs.3 lakh extended to farmers at a subvented interest rate of 7% per annum for a period of one year and a further 3% interest subvention to farmers provided a incentive on prompt repayment.

As  per  the  ISS  provisions  the  banks  should  submit  their  audited  claims  to NABARD and RBI on a half yearly basis and these are forwarded to the Government for settlement. The Government clears the audited claims as and when these are received from  NABARD/RBI.    There  is  no  proposal  to  provide  90%  of  the  claim  amount  in advance.

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