The Reserve Bank of India has asked the private sector banks for estimates of short term loans up to 3 lakh to each farmer in the current financial year.

An RBI notification said that the banks had been advised to immediately submit their estimates for short term loans up to 3 lakh for Kharif and Rabi 2009-10 separately so that the government could estimate the amount to be kept aside for the farmers.

In the 2009-10 budget, finance minister Pranab Mukherjee proposed to resume with the interest subsidy scheme for short-term crop loans up to Rs. 3 lakh to farmers at an interest rate of 7 percent per annum. Following this, the government had committed to provide interest subsidy of 2 percent to state-run banks on short term credit to the extent of Rs. 3 lakh. Only those public sector banks which extend short term credit at 7 percent per annum would be eligible for the subsidy.

Mr Mukherjee also said that the government would pay additional subsidy of 1 percent to those farmers who repay their short term loans as per the schedule. With this the interest rate for them would decrease to 6 percent.

National bank for agriculture and rural development, NABARD, has come out with a scheme for vulnerable farmers. It has been designed to protect the small and marginal farmers against exploitation by moneylenders and middlemen. As per the scheme, farmers will be sanctioned a loan up to 25,000 on 12% or 12.5% simple interest provided they do not take any fresh loan from the moneylenders.