Ensure interest reliefs on farm loans are duly passed on: Centre to Nabard

The government on Thursday asked the lenders to the farm sector including Nabard to ensure that farmers repaying their agriculture loans in time do get the assorted interest reliefs without delay.

Currently, the Centre gives 3% additional interest subvention over and above normal interest subsidy on short-term crop loans on timely repayment, making the effective interest rate at 4%. Some states like Gujarat further subsidise the interest to near zero. “However, farmers are practically asked to pay interest at 7% even if there is timely repayment and the additional subsidy benefit is passed on to farmers by banks only after they realise it from government,” minister of state for agriculture Parshottam Rupala said at a webinar on innovation in agriculture during Covid-19 pandemic, organised by CII and Nabard.

The minister suggested that Nabard should resolve this using technology so that farmers do not wait for the benefit. He cited the recent PM-Kisan direct benefit transfer of Rs 17,000 crore to over 8 crore farmers at once and hoped that such technological intervention is possible to resolve pending issues for the benefit of farmers.

“Farmers get the additional subsidy benefit only after government releases its share and it takes even one year or more to realise these subsidies,” said a manager of a public sector bank. He said the Odisha government released its share of subsidy a few days ago, though claim of which was sent in September 2019. Odisha disburses 2% additional interest subsidy on agriculture credit making the effective rate at 2% in the state.

The Centre has allocated Rs 21,175 crore on interest subsidy for FY21 against Rs 17,863.43 crore last year. The agriculture credit has been targetted at Rs 15-lakh-crore for FY21, up from Rs 13 lakh crore last year. The actual disbursal was about Rs 13.6 lakh crore in FY20. Out of total agriculture credit, 65% is disbursed as short-term (repayment within a year) crop loans.

Primary Agricultural Credit Societies (PACS) will play a crucial role in flowing credit for setting up critical agriculture infrastructure at the ground level and it will create 25 lakh tonne capacity under the Agriculture Infrastructure Fund, said Nabard chairman G R Chintala.

“We are also partnering with most commercial banks to provide credit to micro food processing units associated with the local kirana units. With the launch of the scheme for promotion of 10,000 FPOs, the agriculture sector will experience quality production combined with an industry centric vision,” he said.