New Delhi: In a bonanza to the farming community, the government on Monday announced loans at interest rate of four per cent - three per cent less than market rate - for farmers who pay their dues in time and raised the credit target for farm sector by Rs 1 lakh crore.

"The existing interest subvention scheme of providing short-term crop loans at seven per cent interest rate will continue during the 2011-12 fiscal," Finance Minister Pranab Mukherjee said in the Budget proposal.

He also said the credit target for the agriculture sector has been increased by Rs 1 lakh crore to Rs 4,75,000 crore. Also, banks have been asked to focus on farm credit lending to small and marginal farmers, he added.

"In the last Budget, I had provided an additional two per cent interest subvention to those farmers who repay their crop loan on time. In order to provide further incentive to these farmers, I propose to enhance the additional subvention to three per cent in 2011-12. The effective rate of interest for such farmers would be four per cent," he said.

Faced with high food inflation and the country's dependence on import of pulses and edible oil, the Finance Minister also announced various schemes for promoting production of vegetables, pulses, oilseeds, fodder and nutrition-rich crops like millets and maize.