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Our Bureau

New Delhi , Feb 28

The Union Budget has proposed to make available short-term credit to farmers at seven per cent, for which it would provide subvention to Nabard.

"Government has decided to ensure that the farmer receives short-term credit at seven per cent, with an upper limit of Rs 3 lakh on the principal amount," the Finance Minister, Mr P. Chidambaram, has stated.

Pointing out that this would require a certain level of subvention to Nabard, he said: "I propose to give the subvention. This policy will come into force with effect from kharif 2006-07, and I shall make a detailed statement in due course."

Farmers obtain short-term credit from the cooperative credit structure and Regional Rural Banks (RRBs), with refinance from Nabard.

To grant some relief to the farmers who have availed crop loans from scheduled commercial banks, RRBs and Primary Agricultural Credit Societies for kharif and rabi 2005-06, Mr Chidambaram announced a relief amounting to two percentage points of the borrower's interest liability on the principal amount up to Rs 1 lakh. The amount will be credited to the borrower's bank account before March 31. "I have provided a sum of Rs 1,700 crore for this purpose," he said.

FARM CREDIT

On farm credit, he said, "I propose to ask the banks to increase the level of credit to Rs 1,75,000 crore in 2006-07 and also add another 50 lakh farmers to their portfolio." Farm credit increased to Rs 1,25,309 crore in 2004-05 and is again expected to cross the target of Rs 1,41,500 crore set for the current year.

For tenant farmers, banks have been asked to open a separate window for self-help groups or joint liability groups of tenant farmers and ensure that a certain proportion of the total credit is extended to them.

More Stories on : Budget | Farm credit

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