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Cabinet approves interest waiver on short term crop loans for farmers

The move will ensure easy access to crop loans from Cooperative Banks for farmers and help them tide over the cash crunch faced after demonetization.

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The Union Cabinet chaired by the Prime Minister Narendra Modi on Tuesday approved its ex-post facto interest waiver for the two months of November and December, 2016 for farmers accessing short term crop loans from Cooperative Banks. The decision also provides for interest subvention to National Bank for Agricultural and Rural Development (NABARD) on additional refinance by NABARD to Cooperative Banks.

With this move, farmers across India availing short term crop loans from Cooperative Banks will be benefited.

The decision intends to ensure availability of resources with Cooperative Banks to ensure access to crop loans for farmers. This will help reduce the difficulties of availability of cash that was created after demonetization, for carrying out rabi operations.

The Cooperative Banks will be provided with additional resources through NABARD for refinance on account of interest waiver of two months. These resources will then be extended by Cooperative Banks to the farmers in the current financial year 2016-17. An additional financial liability of Rs 1,060.50 crore will be required for this purpose. A sum of Rs 15,000 crore allocated during 2016-17 to implement the Interest Subvention Scheme (ISS) has already been utilised.

The Government of India has been implementing the Interest Subvention Scheme since 2006-07 under which short-term crop loans upto Rs 3 lakh are made available to the farmers at an interest rate of 7% per annum by public sector banks, regional rural banks and cooperative banks. Farmers are provided with 3% interest subvention for short term crop loan upto Rs 3 lakhs on prompt repayment of the loan. Thus, farmers have to effectively pay only 4% as interest for the said crop loan.

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