The proposal was approved on Thursday evening at a cabinet meeting chaired by Prime Minister Manmohan Singh. The government will provide the subsidized loans to farmers through most of the financial institutions including public sector banks, private banks, cooperative and regional rural banks.

"This scheme has already been extended to crop loans borrowed from private sector scheduled commercial banks in respect of loans given within the service area of the branch concerned," the Finance Ministry said in a statement on Friday.

An additional subsidy of 3 percent is being provided to those farmers who repay their loans on time. Thus, the effective rate of interest for such farmers will be 4 percent per annum. The estimated budgetary implication of this scheme for the current financial year is Rs.15,385 crore.


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