To help banks carry on with crop loans extended to farmers at low rates and to ensure credit to the farm sector, the Cabinet on Wednesday cleared the decision to pitch in with 1.5 per cent interest subvention to all financial institutions for FY23 and FY24.
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Under the Interest Subvention Scheme (ISS), lenders offer a 3 per cent interest subvention on short-term agriculture loans of up to Rs 3 lakh — originally offered at 7 per cent interest, and extended to farmers and those involved in fisheries and animal husbandry — to borrowers who repay the loans on time, effectively making them cheaper.
The increase in interest subvention support requires additional budgetary provisions of Rs 34,856 crore, which was cleared by the Union Cabinet.
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“This will help the farmers in an indirect way and will directly help the financial institutions to continue to keep extending the loans to farmers, in the wake of revision of repo rates by the RBI,” Information and Broadcasting Minister Anurag Thakur said while briefing the media after the Cabinet meeting.
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