At a time when unseasonal rains have caused widespread crop damage, the financeministry is revamping the interest subvention scheme for short- term crop loans for 2015-16.

The new scheme, which is likely to target small and marginal farmers by tapping into the direct benefit transfer system, is likely to be launched by July, said a governmentofficial, adding that at present the interest subvention scheme of 2014-15 would continue till June 30. Sources said the finance ministry is in discussion with publicsector banks and NABARD on alternative methods to route the scheme.

“It is being discussed how best to target the scheme so that it reaches the farmer directly and also ensure that the funds are not diverted to some other purpose by the farmer,” said the official, adding that the government is also considering options to provide the subvention to long-term crop loans.

For effective targeting, the finance ministry is considering using the DBT scheme to transfer funds directly into the farmer’s bank account through the Pradhan Mantri Jan-Dhan Yojana, rather than pay the lending institution. “All households have a bankaccount and this could be a workable strategy,” said the official.

As an interim measure, the finance ministry has also asked the Reserve Bank of Indiaand NABARD to instruct their lending institutions to implement the scheme in itscurrent format up to June 30.

At present, under the interest subvention scheme, banks extend short term loans of up to Rs 3 lakh to farmers at an interest of 7 per cent. In turn, the government provides a subvention of 2 per cent to the lenders. Prompt repayment of loans by farmers also earns them an additional 3 per cent subvention by the government. The financeministry has allocated Rs 13,000 crore for the scheme in 2015-16.

The scheme was started by the former UPA government has been running since 2006-07 and had a target of Rs 18,583 crore for 2014-15.