Govt seeks estimate of short-term farm loans

MUMBAI: To help the government assess likely interest subsidy amount, RBI on Thursday asked state-run banks for estimates on short-term loan of up to Rs 3 lakh given to each farmer in the current fiscal.

���Banks are advised to immediately submit their estimates of short-term production credit to farmers up to Rs 3 lakh for Kharif and Rabi 2009-10 (separately) to enable us to provide the government with an estimate of the likely amount of subvention,��� RBI said in a notification.

Finance minister Pranab Mukherjee in his budget speech this year had proposed continuing with the interest subsidy scheme for short-term crop loans to farmers for loans up to Rs 3 lakh each farmer at the interest rate of 7% per annum. Following the announcement, the government had said it would provide interest subsidy of 2% to public sector banks on short-term production credit up to Rs 3 lakh provided to farmers. The subsidy would be given to those public sector banks, which extend short-term credit at 7% per annum. RBI said the banks are required to submit their claims on half yearly basis.

Mr Mukherjee had also announced that the government would pay additional subsidy of 1%, as an incentive to those farmers who repay their short-term crop loans on schedule. The interest rate for these farmers will come down to 6%.