Budget 2019: Restructured farm loans affected by natural calamity to attract interest subvention of 5%

Farm loans, generally, attract an interest rate of 9 percent. The government, however, provides an interest subvention to make available short-term farm credit at an affordable rate and help boost farm output.

For farmers affected by natural calamity, and who are provided funds via Natural Calamity Fund, an interest subvention of 2 percent, topped with 3 percent will be given for the entire loan restructuring period, Goyal said.

According to the RBI, farm loans up to Rs three lakh attract a two percent interest subsidy to take the effective rate at 7 percent per annum.

“To provide an additional interest subvention of 3 percent per annum to such of those farmers repaying in time i.e. from the date of disbursement of the crop loan up to the actual date of repayment by farmers or up to the due date fixed by the banks for repayment of crop loan, whichever is earlier, subject to a maximum period of one year from the date of disbursement. This also implies that the farmers paying promptly as above would get short term crop loans at 4 percent per annum during the year 2017-18,” the RBI has said.

During the union budget of 2018-19, government had set aside Rs 15,000 crore as money for interest subsidy for short term credit to farmers. It had also set aside Rs 200 crore for price support schemes.