The Union Cabinet on 5 July 2016 approved the Interest Subvention Scheme for farmers for the year 2016-17.
The Government has assigned a sum of 18276 crore rupees for the purpose. This scheme will help farmers getting short term crop loan payable within one year up to 3 lakhs rupees at only 4% per annum.
Key features of the scheme
• The Union Government will provide interest subvention of 5% per annum to all farmers for short term crop loan payable within one year. Therefore, farmers will have to effectively pay only 4% as interest.
• In case farmers do not repay the short term crop loan in time, then they will be eligible for interest subvention of 2% as against 5% available.
• The government will give approximately 18276 crores rupees as interest subvention for 2016-17.
• The Union Government has approved an interest subvention of 2% i.e an effective interest rate of 7% for loans up to 6 months to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce.
• The interest subvention of 2% will be provided to banks for the first year on the restructured amount to provide relief to the farmers affected by natural calamities.
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