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The government on Friday has approved compensation of Rs. 4,868 crore to public sector banks for providing loans to farmers.
The Cabinet had today granted the compensation sum for offering loans to farmers at lower interest rates.
Even the target for agricultural credit flow has been raised to Rs.3,75,000 crore for the fiscal year 2010-11, from Rs.3,25,000 crore in 2009-10.
"The Cabinet today gave its approval for the release of a sum of Rs.4,868 crore as interest subvention to Public Sector Banks (PSBs), Regional Rural Banks (RRBs) and Cooperative Banks and to NABARD for refinance to RRBs and Cooperative Banks at concessional rates to reimburse the amount of interest subvention," said the government in a statement.
The government has fixed short-term crop loans to a maximum of Rs. 3,00,000 with seven percent interest. The interest would, further, be brought down to 5 percent if loans are repaid as per the schedule.
Earlier, farmers were given with one percent interest subvention for those who stuck to the payment schedule.
