Lok Sabha Question No. 2714 (UNSTARRED), answered on 2017-03-17
Subject: Interest Subvention Scheme
Ministry: FINANCE
Asked by: NALIN KUMAR KATEEL, SANTOSH AHLAWAT, NANABHAU FALGUNRAO PATOLE, B.N. CHANDRAPPA

## Government of India Ministry of Finance Department of Financial Services

## Lok   Sabha Unstarred Question No 2714 To be answered on 17 th  March, 2017/Phalguna 26, 1938 (Saka) Interest Subvention Scheme

2714. SHRI NALIN KUMAR KATEEL: SHRI NANA PATOLE:

SHRIMATI SANTOSH AHLAWAT: SHRI B.N. CHANDRAPPA:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to continue the subsidy on short term crop loans and if so, the details thereof;
- (b) whether the Government also proposes to provide cheap loans or low interest loans under the  interest  subsidy  scheme  to  farmers  who  make  timely  repayment  of  loans  and  if  so,  the details  thereof  along  with  the  total  number  of  farmers  likely  to  be  benefited  thereby  in  the country, State/UT-wise;
- (c) whether the Government intends to provide 75 percent of the amount of interest subvention in the beginning of the financial year or to provide 75 percent of interest subvention as interest free revolving fund to Cooperative Banks; and
- (d) the other steps taken/being taken by the Government to improve the financial situation of the farmers?

## Answer

The Minister of State in the Ministry of Finance (Shri  Santosh Kumar Gangwar)

- (a)  to  (c): The  Government  in  the  Department  of  Agriculture,  Cooperation  and  Farmers' Welfare (DAC&FW) has approved the Interest Subvention Scheme for short term crop loans upto Rs.3.00 lakh for the year 2016-17 as per details given below:
-  With a view to ensure availability of agriculture credit at a reduced interest rate of 7% p.a. to the farmers, the Government of India implements an interest subvention scheme for short term crop loans up to Rs. 3.00 lakh. Besides 2% interest subvention given to banks so that they lend the short term crop loan upto Rs.3.00 lakh @ 7% p.a., additional 3%  incentive  is  given  to  the  farmers  for  prompt  repayment  of  the  loan,  reducing  the effective rate of interest to 4%.
-  In order to discourage distress sale of crops by small and marginal farmers, the benefit of interest subvention of 2%is extended to such farmers for a further period of up to six months against negotiable warehouse receipts.
-  To provide relief to farmers affected by natural calamities, the interest subvention of two percent is available to banks for the first year on the restructured amount. Such restructured loans may attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.

Reserve Bank of India (RBI) & National Bank for Agriculture and Rural Development (NABARD) have reported that they have no information regarding the number of farmers to be benefitted under the Interest Subvention Scheme during the current year.

- (c):  There  is  no  such  proposal  under  consideration of the Government to provide 75% of the amount of Interest Subvention in the beginning of the financial year or to provide 75% of interest subvention as interest free revolving fund to Cooperative Banks.
- (d): Steps taken by Government to improve the financial situation of the farmers are as follows:
- i.  Government  fixes  agriculture  credit  disbursement  targets  for  the  banking  sector  every  year and banks have consistently surpassed these targets
- ii.  The  Priority  Sector  Lending  (PSL)  directions  of  RBI  mandate  all  Domestic  Scheduled Commercial  Banks  to  earmark  18%  of  their  Adjusted  Net  Bank  Credit  (ANBC)  or  Credit Equivalent  amount  of  Off-Balance  Sheet  Exposure  (OBE),  whichever  is  higher,  as  on  the corresponding date of the previous year, for lending to Agriculture including loans to farmers. Further, a sub-target of 8% for small and marginal farmers has also been fixed.
- iii.  Loans  to  distressed  farmers  and  to  other  persons  (not  exceeding  Rs.  1,00,000/-  per borrower) indebted to non-institutional lenders is an eligible category under PSL, to enable them to repay their debt to non-institutional lenders.

iv. In order to ensure that all eligible farmers are provided with hassle-free and timely credit for their  agricultural  operations,  the  Government  has  introduced  the  Kisan  Credit  Card  (KCC) Scheme,  which  enables  them  to  purchase  agricultural  inputs  such  as  seeds,  fertilisers, pesticides,  etc.  and  draw  cash  to  satisfy  their  agricultural  and  consumption  needs.The  KCC Scheme has since been simplified. It has the provision of ATM enabled debit card with, inter alia, facilities of one-time documentation and built-in cost escalation in the limit, etc.

- v. To bring small, marginal, tenant farmers, oral lessees, etc. into the fold of institutional credit, Joint Liability Groups (JLGs) have been promoted by banks.
- vi.  The Government decided that an additional grace period of 60 days for prompt repayment incentive @ 3% will be provided to such of the farmers whose crop loans dues fall due between 01/11/2016 to 31/12/2016 and if such farmers repay the same within 60 days from their due date in this period.

vii.  The  Government  also  decided  to  grant  interest  waiver  for  two  months  (November  and December,  2016)  for  all  short  term  crop  loan  availed  from  Cooperative  Banks  between 01.04.2016 to 30.09.2016 and upfront deposit of the same in the accounts of the concerned farmers.

viii.  NABARD will make short term borrowings at prevailing market rate of interest for approx. Rs. 20,000 crore for on-lending to Cooperative Banks at 4.5% rate of interest.