EGoM to consider slashing interest rate on crop loans

NEW DELHI: Drought-hit farmers, whose crop loans are rescheduled into term loans due to their inability to pay, may be charged lower interest rate at 7 per cent from 12 per cent as part of relief measures being considered by the government.

The Agriculture Ministry has moved this proposal for consideration before the Empowered Group of Ministers (EGoM) on drought, headed by Agriculture Minister Sharad Pawar, sources said. The EGoM meeting is likely to take place soon.

One of the major proposals is on interest subvention on crop loan, especially those rescheduled as term loan due to drought in some states, the source added.

Presently, crop loans are given at the interest rate of 7 per cent. During agrarian crisis like drought, the recovery is automatically rescheduled, that is, crop loan is converted into a term loan and farmers get three years time to repay.

However, the rescheduling of crop loans is not benefiting farmers to a greater extent as interest rate for term loan is higher at 12 per cent.

Hence, the Agriculture Ministry has proposed bringing the interest rate on term loan at par with the crop loan at 7 per cent, the source noted.

Due to deficit rains, four-states -- Karnataka, Gujarat, Maharashtra and Rajasthan have declared drought in more than 390 taluks. Monsoon is deficient in the country by 12 per cent so far.