The Union Cabinet has approved the Interest Subvention Scheme for farmers for the year 2016-17. For this purpose Union Government has earmarked a sum of 18,276 Crore Rupees. The scheme will help farmers getting short term crop loan payable within one year up to 3 lakhs Rupees at only 4% per annum. Interest subvention for providing short term crop loan to farmers has been provided to Public
Sector, Private Sector, Cooperative, Regional Rural banks and NABARD. Key Features of Scheme Union Government will provide interest subvention of 5% per annum to all farmers for short term crop loan up to 1 year for loan upto 3 lakhs rupees for year 2016-17. Thus farmers will have to effectively pay only 4% as interest. In case they fail to repay loan in time they would be eligible for interest subvention of 2% as against 5% available above. Union Government will provide an interest subvention of 2% i.e an effective interest rate of 7% for loans upto 6 months to give relief to small and marginal farmers who borrow at 9% for the post-harvest storage of their produce. The interest subvention of 2% will be provided to Banks for the first year on the restructured amount in order to provide relief to the farmers affected by natural calamities. What is Interest Subvention? Interest subvention is a form of waiver of some percentage of interest on loan given to promote some particular industry and general public interest. This implies that with the subsidy in hand, the loan borrower has not to pay total interest on loan amount and the balance interest amount will be borne by the government.
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