Cabinet okays interest subvention; Nafscob Prez thanks Shah

Agreeing to the demand raised by cooperators during the Rural Cooperative Banks conference held in Vigyan Bhawan recently, the Union Cabinet, chaired by the Prime Minister Narendra Modi has restored Interest Subvention on short term agriculture loans to 1.5% for all financial institutions.

Interest Subvention of 1.5% will be provided to lending institutions (Public Sector Banks, Private Sector Bank, Small Finance Banks, Regional Rural Banks, Cooperative Banks and Computerized PACS directly ceded with commercial banks) for the financial year 2022-23 to 2024-25 for lending short term agri-loans upto Rs 3 lakh to the farmers.

As soon as the news came, talking to the Indian Cooperative, several cooperators hailed the decision and thanked Prime Minister Narendra Modi and Union Home and Cooperation Minister Amit Shah for restoring the interest subvention.

Reacting to this, Nafscob Chairman Ravinder Rao said, “On 12th August 2022, from the podium we demanded the restoration of the interest subvention in the presence of Union Minister Amit Shah and taking the matter seriously, the GOI has done the same in the span of four days. We welcome the decision”.

“We thank Amit Shahji, our Cooperation Minister for understanding the plight of cooperative societies. It will not only help banks but also PACCs in a big way. It will reduce the extra burden on banks”, he added while talking to Indian Cooperative on the phone.

This increase in Interest Subvention support requires additional budgetary provisions of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme.

According to PIB’s press release, “Increase in Interest Subvention will ensure sustainability of credit flow in the agriculture sector as well as ensure financial health and viability of the lending institutions especially Regional Rural Banks & Cooperative Banks, ensuring adequate agriculture credit in rural economy”.

“Banks will be able to absorb an increase in cost of funds and will be encouraged to grant loans to farmers for short term agriculture requirements and enable more farmers to get the benefit of agriculture credit. This will also lead to generation of employment since short term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, fisheries”, it further reads.

Farmers will continue to avail short term agriculture credit at an interest rate of 4% per annum while repaying the loan on time.