A news outlet dealing with economic affairs says the finance ministry has instructed state-run banks to continue the centre’s scheme for cheaper short-term crop loans after farmers complained about high interest rates as the government tries hard to project a pro-farmer image.
Banks were denying farm loans at subsidized rates to farmers after finance minister Arun Jaitley failed to mention the continuation of the scheme in 2015-16 in his budget speech. He had, however, made an allocation in the budget for the scheme. Under the scheme, banks extend loans up to Rs.3 lakh to farmers at a concessional interest rate of 7%.
The farmers get a further 3 percentage point discount for timely repayment, making the effective rate 4%. But, due to confusion over the scheme’s continuation, banks were charging farmers 10-11%.
The department of financial services at the ministry said in a notification that the government is considering various alternative measures to improve the efficacy of the scheme.
Banks have been set a target of lending Rs.8.5 trillion to the agriculture sector in the current fiscal, against Rs.8 trillion a year ago.
