Punctuality prize: Cheaper loans for farmers who pay back on time | business | Hindustan Times
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Punctuality prize: Cheaper loans for farmers who pay back on time

business Updated: Jul 07, 2009 01:45 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
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In a bid to balance the aftermath of a massive debt waiver scheme for the farmers while sustaining broad-based farm sector growth, the government has decided to reward those who repaid their dues on time.

Farmers who paid back their debts on time would be able to avail agriculture loans at 6 per cent instead of 7 per cent for short-term crops.

The government will also continue with the interest subvention scheme for short-term crop loans to farmers for loans up to Rs 3 lakh per farmer at an interest rate of 7 per cent per annum. In addition, the agriculture credit target for public sector banks has been increased to Rs 3,25,000 crore for the current fiscal.

“I am also happy to announce that, for this year, the government shall pay an additional subvention of 1 per cent as an incentive to those farmers who repay their short -term crop loans on schedule. Thus, the interest rate for these farmers will come down to 6 per cent per annum,” Union finance minister Pranab Mukherjee said on Monday.

However, the move has its limitations.

The move, seen as positive and one that aims at providing relief to the community, does not address the inconveniences that arise from the lengthy procedural exercise.

At present, about 60 per cent of farmers still avail loans from non-institutional sources like the moneylenders in a bid to avoid procedural complications.

“Though the step is welcome, farmers face a lot of difficulty at the ground level and this needs to be sorted out,” said agriculture expert Prem S Vashishtha. “Otherwise this would serve as temporary relief.” The move would ease the pressure off the farmers, especially at the wake of a sub normal monsoon this year.