Centre to make loans cheaper for farmers

The Centre on Wednesday decided to make loans cheaper for farmers. The decision comes in the wake of farmer unrest in several states.

Under a proposal approved by the Cabinet, the Centre will provide a subsidy of up to 5% on farm loan interest, sources said.

A 2% subsidy on interest will be given on agricultural loans. Additionally, those who repay such loans in time will get a 3% subsidy. Thus, the effective rate of interest for those who make timely repayments will be 4% as against the prevailing 9%.

The scheme will be available for short-term crop loans of up to Rs 3 lakh repayable within a year, sources said. The proposal is expected to cost the exchequer Rs 20,339 crore in 2017-18. “The interest subvention will be given to public sector banks, private sector banks, cooperative banks and regional rural banks (RRBs) on use of their own funds, and to Nabard for refinance to RRBs and cooperative banks,” an official statement said.
 
The Interest Subvention Scheme will continue for a year and will be implemented by Nabard and RBI, it said.
In case of farmers affected by natural calamities, an interest subvention of 2% will be given to banks for the first year on the restructured amount, the statement read.

Protests and waivers
The Cabinet decision comes amid protests in the BJP-ruled Madhya Pradesh, where farmers are demanding waiver of crop loans. Under similar pressure, Maharashtra recently waived farm loans.

Earlier this year, farmers from Tamil Nadu travelled to Delhi for a sit-in protest, demanding waiver of loans adding up to Rs 40,000 crore; they were partly compensated by the government. 

Uttar Pradesh, with the BJP’s Yogi Adityanath as chief minister, has also announced a loan waiver of Rs 36,000 crore.