On Wednesday, the Union Cabinet has passed a mandate approving a rebate rate of 1.5% on short-term loans pertaining to agricultural requirements. The loan amount can go as high as up to INR 3lakhs, provided all lending entities perceive that as for current and upcoming financial years.
This move aims at redeveloping the idea of credit flow on easier terms in the agricultural sector of India – this has been thoroughly highlighted by Anurag Thakur, the broadcasting minister of India in the cabinet meeting.
As per the information provided after the cabinet meeting, it has shed lights on the interest subvention that will be offered by both public and private sector banks, alongside small finance banks, regional banks, and cooperative banks. This will also bring in the agricultural credit societies of India (computerised) from the financial year 2022-23 to 2024-25.
The cabinet statement post the meeting read, “This increase in interest subvention support requires additional budgetary provisions of ₹34,856 crores for the period of 2022-23 to 2024-25 under the scheme.
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Back in the financial year 2021-22, the subvention rate of 1.5% stood at 2%. There was an additional interest subvention of 3% per annum which was implied on farmers who failed to repay back the principal amount within the limited time-frame.
During the particular phase, farmers had routinely been dependent on credits for ulterior agricultural requirements such as pesticides, seeds, sowing machines, and fertilisers. The pre-existing subvention, which was considered quite critical, made it difficult for farmers to meet growing costs on agriculture.
The interest subvention meeting held by the Cabinet and chaired by the Prime Minister of India, Narendra Modi, will also be applicable to fund allied agricultural activities such as fishery, dairy-husbandry, animal husbandry, among others.
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As highlighted by the Cabinet, the “revolutionary” move will “ensure financial health and viability of lending institutions, especially regional rural banks and cooperative banks”.
