Budget 2013: Govt continues with 3% interest subvention scheme for farmers

NEW DELHI: To encourage prompt repayment of bank loans, the government will continue with the additional three per cent interest subvention scheme for farmers, said the Finance Minister, P Chidambaram.

Under the existing interest subvention scheme, farmers get short-term crop loans at seven per cent interest. If the loan to the bank is promptly paid then the effective rate of interest to the farmer works out to four per cent a year due to the additional interest subvention.

"The Government is giving interest subvention to improve the loan repayment culture in the farm segment. The agriculture debt waiver and debt relief of 2009 had marred the repayment culture," said a senior bank official. The Finance Minister also proposed to raise the target for agricultural credit in 2013-14 to Rs 7 lakh crore from Rs 5,75,000 crore in 2012-13.

He also proposed to allow farmers, who repay bank loans in time, to avail subsidised loans from scheduled commercial banks in private sector as well.

"This will help farmers to have a wider access to farm credit which will help in achieving agricultural growth. They will be able to invest in farm machinery and inputs," said R S Sharma, an agri-economist.