Interest Subvention on short term agriculture loans: The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved to restore Interest Subvention on short term agriculture loans.

Key Points:

• Interest Subvention of 1.5 per cent will be provided to lending institutions including Public Sector Banks, Private Sector Bank, Small Finance Banks, Regional Rural Banks, Cooperative Banks and Computerized PACS directly ceded with commercial banks for the financial year 2022-23 to 2024-25 for lending short term agri-loans up to Rs 3 lakh to the farmers.
• 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.

Benefits:

• Increase in Interest Subvention will ensure sustainability of credit flow in the agriculture sector as well as ensure financial health and viability of the lending institutions especially Regional Rural Banks & Cooperative Banks, ensuring adequate agriculture credit in rural economy.
• Banks will be able to absorb increase in cost of funds.
• The Banks will be encouraged to grant loans to farmers for short term agriculture requirements and enable more farmers to get the benefit of agriculture credit.
• This will also lead to generation of employment since short term agri-loans are provided for all activities including Animal Husbandry,  fisheries, Dairying and Poultry .
• Farmers will continue to avail short term agriculture credit at interest rate of 4% per annum while repaying the loan in time.