Ensure interest relief on farm loans is properly passed on: Center to Nabard
The government on Thursday called on farm sector lenders, including Nabard, to ensure that farmers who repay their farm loans on time receive the various interest relief without delay.
Currently, the center provides an additional 3% interest rebate over the normal interest rebate for short-term crop loans with timely repayment, bringing the effective interest rate to 4%. Some states like Gujarat continue to subsidize interest rates to near zero. “However, farmers are effectively required to pay 7% interest even if timely repayment is made, and the additional subsidy benefit is passed on to farmers by banks only after they receive it from the government,” he said Minister of State for Agriculture Parshottam Rupala Webinar on innovation in agriculture during the Covid-19 pandemic organized by CII and Nabard.
The minister suggested that Nabard should use technology to solve this so farmers don’t wait for the benefit. Referring to PM-Kisan’s recent direct transfer of Rs 17,000 crore to over 8 crore farmers at once, he hoped such technological intervention could solve pending problems for the benefit of farmers.
“Farmers only get the additional subsidy benefit after the government has released their share, and it takes even a year or more for those subsidies to materialize,” said a public sector bank manager. He said the Odisha government released its share of the subsidy a few days ago, although the request was sent out in September 2019. Odisha pays out 2% additional interest rate subsidies on farm loans, bringing the effective interest rate in the state to 2%.
The center has allocated Rs 21,175 crore for FY21 interest rate subsidy against Rs 17,863.43 crore last year. The farm loan was valued at Rs 15 crore for FY21 versus Rs 13 crore last year. The actual payout in FY20 was about Rs 13.6 crore. Of the total agricultural credits, 65% are disbursed as short-term (repayment within one year) crop credits.
Primary Agricultural Credit Societies (PACS) will play a crucial role in injecting credit to build critical agricultural infrastructure at ground level and will create a capacity of 25 lakh tons under the Agricultural Infrastructure Fund, Nabard Chairman GR Chintala said.
“We also work with most commercial banks to provide credit to micro food processing units that are linked to local Kirana units. With the launch of the program to encourage 10,000 FPOs, the agricultural sector will see quality production combined with an industry-centric vision,” he said.