The interest subvention scheme for farmers aims at providing short term credit to farmers at subsidised interest rate. The policy came into force with effect from Kharif 2006-07. The scheme is being implemented for the year 2016-17. The Government has earmarked approximately Rs 18,276 crores for interest subvention during 2016-17.
Interest subvention for short term crop loans
- The Central Government will provide interest subvention of 5 per cent per annum to all farmers for short term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them during the year 2016-17.
- Farmers will thus have to effectively pay only 4% as interest. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.
- The amount of subvention is to be calculated on the amount of crop loan from the date of disbursement up to the date of repayment.
Interest subvention for post harvest loans
In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e an effective interest rate of 7% for loans upto 6 months.
Interest subvention for relied to farmers affected by natural calamities
To provide relief to the farmers affected by Natural Calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount.
Source : PIB