In a week’s time on February 1, the budget 2019-20 would be out. As per the sources, the farm credit is likely to go up by 10% to a record Rs 12 lakh crore. The Cabinet has been on a move to increase the credit target for the agriculture sector every year.
Likewise, this time the target is expected to be raised by around 10% or Rs 1 lakh crore to Rs 12 lakh crore.For the current financial year, the government has fixed a credit target of Rs 11 lakh crore.
Not only this, the farming credit flow is on an uprising trend consistently over many years, which surpasses the target set for every fiscal. Like for instance, the credit worth of Rs. 11.68 lakh crore was provided to the farmers in year 2017-18 which was much higher than Rs 10 lakh crore target fixed for that particular year.
It is very important to attain higher farm output. The institutional credit helps in delinking cultivators from non- institutional sources where they are forced to borrow at exorbitant rates of interest. The government has been offering interest funding to make available short-term farm credit at a fair rate to help increase farm output. Generally, the farm loans draw an interest rate of 9%.
The government also provides 2 % interest subsidy to make sure that farmers get short-term farm loan of up to Rs 3 lakh at a constructive rate of 7 % per year. With this, an extra incentive of 3 % is offered to farmers for timely repayment of loans in due date, making the effective interest rate 4 %.
The interest subsidy is provided to public sector banks (PSBs), regional rural banks (RRBs), cooperative banks and private lenders on use of own funds and to the NABARD for refinancing RRBs and cooperative banks.
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