Cabinet nod for 1.5% interest subvention on farming loans

The Cabinet approved a 1.5% interest subvention on short-term farm loans up to ₹3 lakh, which will be provided to lending institutions for the financial year 2022-23 to 2024-25.

In order to support sectors affected by the Covid-19 pandemic, the meeting chaired by Prime Minister Narendra Modi also approved an enhancement of the Emergency Credit Line Guarantee Scheme (ECLGS) corpus by ₹50000 crore to ₹ 5 trillion. The increased amount is exclusively earmarked for hospitality and related sectors. Up to 5 August, loans of about Rs. 3.67 trillion have been sanctioned under the ECLGS, which is valid till 31 March, 2023. The enhancement in the corpus  is aimed  to provide "much needed relief" to enterprises in these contact-intensive services by incentivizing lending institutions to provide additional credit of up to ₹ 50,000 crore at low cost, thereby enabling these business enterprises to meet their operational liabilities and continue their businesses.

The 1.5% interest subvention scheme for the farm sector aimed to ensure adequate agriculture credit in the rural economy and the financial health and viability of the lending institutions especially regional rural banks and cooperative banks.The measure will entail an additional budgetary provision of ₹ 34,856 crore for the period of FY23 to FY25 under the scheme.

"Keeping in view the changing economic scenario, especially increase in the interest rate and lending rates for the financial institutions especially Cooperative Banks and Regional Rural Banks, The Government has reviewed the rate of Interest subvention provided to these Financial Institutions. It is expected that this will ensure adequate credit flow in agriculture sector to the farmer as well as ensure financial health of lending institutions". To address this challenge, Government of India has proactively decided to restore Interest Subvention on short term agriculture loans to 1.5% for all financial institutions," said the government in a release on  Wednesday.

With this, banks will be able to absorb an increase in cost of funds and will be encouraged to grant loans to farmers for short term agriculture requirements and enable more farmers to get the benefit of agriculture credit.This will also lead to generation of employment since short term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, fisheries, the government said. Farmers will continue to avail short term agriculture credit at an interest rate of 4% per annum while repaying the loan in time.

In order to ensure that the farmers have to pay a minimal interest rate to the bank, the Government of India had introduced Interest Subvention Scheme (ISS), now renamed as Modified Interest Subvention Scheme (MISS), to provide short term credit to farmers at subsidized interest rates.

Under this scheme, short term agriculture loan upto Rs. 3 lakh is available to farmers engaged in Agriculture and other allied activities including Animal Husbandry, Dairying, Poultry, fisheries etc. at the rate of 7% per annum and an additional 3% subvention is also given to the farmers for prompt and timely repayment of loans. Therefore, if a farmer repays his loan on time, he gets credit at the rate of 4% p.a. This support, given through financial institutions, is 100% funded by the Centre, and is also the second largest scheme of the department of agriculture and farmers’ welfare as per budget outlay and coverage of beneficiaries.

"The ongoing pandemic has adversely impacted contact-intensive sectors, especially the hospitality and related sectors more severely," the government noted in a release. It said that while other sectors were back faster on the path of recovery, demand continued to be subdued for these sectors for a longer period, suggesting the need for suitable interventions for their sustenance and recovery.

Besides, given their high employment intensity and their direct and indirect linkages with other sectors, their revival is also necessary for supporting overall economic recovery.

Finance minister Nirmala Sitharaman had in the Union Budget 2022-23 announced extending validity of ECLGS up to March, 2023.

With high immunization levels, progressive roll-back of restrictions and overall economic recovery, conditions are in place for sustained growth in demand for these sectors as well.  This additional guarantee cover is expected to support the recovery of these sectors as well, said the release.

The ECLGS scheme was announced as part of the Atmanirbhar Bharat Package in 2020 to help businesses meet their operational liabilities and resume activity post the pandemic. Banks are provided with 100% against any losses suffered by them due to non-repayment by borrowers.

The Cabinet also approved a proposal to widen access of the Traditional Knowledge Digital Library (TKDL) database to users, besides patent offices. The move is aimed to drive research & development, and innovation based on India's traditional knowledge.

The TKDL currently contains information from existing literature related to ISM such as Ayurveda, Unani, Siddha, Sowa Rigpa and Yoga.  The information is documented in a digitized format in five international languages which are English, German, French, Japanese and Spanish.

"The approval of the Cabinet to widen the access of the database beyond patent offices lays emphasis on integrating and co-opting traditional knowledge with current practices towards enhancing innovation and trade," said the government in a press release.

TKDL provides information in languages and format understandable by patent examiners at Patent Offices worldwide, to prevent the erroneous grant of patents.  Until now, access to the complete TKDL database is restricted to 14 Patent Offices worldwide for the purposes of search and examination.  This defensive protection through TKDL has been effective in safeguarding Indian traditional knowledge from misappropriation and is considered a global benchmark.