"Government will provide interest subvention of 2 per cent per annum to Public Sector Banks (PSBs) in respect of short-term production credit up to Rs 3 lakh during the year 2012-13," RBI said in a notification.
This subvention will be available to PSBs on the condition they make available short-term production credit up to Rs 3 lakh at ground level at 7 per cent per annum, it added.
The amount of subvention will be calculated on crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of crop loan by the farmer of up to the date of loan fixed by banks for the repayment of loan, whichever is earlier, subject to maximum period of one year.
Also the government will provide additional interest subvention of 3 per cent per annum to banks in respect of the farmers paying their loan within one year. This will be applicable on farm loans up to Rs 3 lakh.
RBI said the subvention will be applicable only if banks provide such loans at 4 per cent per annum and the benefit would not include those farmers who repay after one year of availing such loans.
The government in the Budget 2012-13 had said the interest subvention scheme for providing short-term loans to farmers at 7 per cent would be continued in this year.