Farmers actually pay 14% on subsidized 7% loans: NABARD Study

In the Union Budget 2006-07, the Indian Finance Minister had announced the subsidized 7% loan for farmers. A recent study by NABARD says that it actually translates into a 14% rate according to a study conducted by Nabard. However, n a survey of some 2500 farmers, NABARD has found that borrowers end up paying a significant amount as transaction charges. When these transaction costs are included, the all-inclusive cost of the loan comes to almost 14%, the non-interest costs on these loans work out to 7%.

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