New Delhi/Chennai: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved interest subvention of 1.5 per cent per annum on short-term agriculture loan for all financial institutions lending up to Rs 3 lakh to the farmers. The government's decision is aimed at ensuring adequate credit flow to agriculture sector. Apart from farmers, this interest relief facility has been extended to fishery, animal husbandry and allied sectors.
The Cabinet also gave its nod for enhancing the corpus of Emergency Credit Line Guarantee Scheme (ECLGS) by Rs 50,000 crore for increasing the limit of admissible guarantees. With this, it is expected that Covid-hit sectors such as hospitality, tourism, travel and related sectors will get a much-needed relief. The enhanced credit line will be immediately available to the sector.
Briefing the media after the Cabinet meeting, Union information and broadcasting minister Anurag Thakur said, "the interest subvention of 1.5 per cent will be provided to lending institutions, inclu-ding public sector banks, private sector banks, small finance banks, regional rural banks, cooperative banks, and computerised PACS for financial year 2022-23 to 2024-25."
"This interest subvention scheme will require additional budgetary provisions of Rs 34,856 crore for the period. The increase in interest subvention will ensure the sustainability of credit flow in the agriculture sector as well as the financial health of the lending institutions. Banks will be able to absorb the increase in cost of funds and will be encouraged to grant loans to farmers for short terms," he added.
"While repaying the loan in time, farmers will continue to avail short-term agriculture credit at an interest rate of 4 per cent," the minister added.
The minister further said the Cabinet also approved ECLGS scheme worth Rs 50,000 crore for hospitality, travel and tourism sectors.
By earmarking the additional amount, the limit of the ECLGS scheme has moved up from Rs 4.5 lakh crore to Rs 5 lakh crore. The additional amount of Rs 50,000 crore would be made applicable to enterprises till March 31, 2023. The government had announced the allocation in the last budget.
As ECLGS is a continuing scheme, the allocation will immediately be available for the sectors after the Cabinet nod. It does not need to be further notified.
In June last year, the finance ninister had announced Rs 1.1 lakh crore loan guarantee scheme, of which Rs 50,000 crore was allocated to the healthcare sector and Rs 60,000 crore for other covid-affected sectors, including hospitality and tourism. However, the government failed to notify the scheme for the hospitality sector and the sector has not received the benefits yet.
“Several hospitality establishments cannot sustain operations without sufficient liquidity, but the extended ECLGS could help businesses buy some more time to keep the wheels in motion," said Gurbaxish Singh Kohli, vice president, Federation of Hotel & Restaurant Associations of India.
Under ECLGS, loans of Rs 3.67 lakh crore have been sanctioned till August 5, 2022 to different sectors.