Banking News

Interest subvention on short-term Crop loans

Interest subvention on short-term Crop loans

The Government of India has extended implementation of the  interest subvention scheme for the year 2016-17 for short-term crop loans up to Rs 3 lakh as available hitherto. The 2% interest subvention will be calculated on the crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of the crop loan by the farmer or up to the due date of the loans fixed by the banks, whichever is earlier, subject to a maximum period of one year.

RBI in its circular no.FDD.CO.FSD.BC No.29/055/05.02.00 dated 25.05.2017 advised all the banks to take note of continuation of above scheme for 2017-18 till further instructions are received.

The implementation of the scheme is subject to following conditions.

  1. The commercial banks (both public and private) are eligible for interest subvention at the rate of 2 per cent in respect of short term crop loans by their rural and semi-urban branches. The funds used for short term crop loan up to Rs.3 lakh should be from banks own funds and the interest charged to the farmers should be at the ground level of 7 percent per annum.
  2. The farmers who promptly repay the loan on or before the due date are also eligible for additional interest subvention at the rate of 3 per cent per annum. The interest subvention amount is calculated from the date of loan availed to the date of closure of loan. The benefit of interest subvention would not accrue to those farmers who repay after one year after disbursement of loan. In actual terms, this implies that the farmers who repay the short term crop loan promptly would get the loan at the interest rate of 4 percent per annum.This benefit would not accrue to those farmers who repay after one year of availing such loans.
  3. The small and marginal farmers having Kisan Credit Card are eligible additional period up to six months against negotiable warehouse receipts for the produce stored in the  warehouse. The interest subvention is available at the same rate as available to crop loans.
  4. In the case of restructured account due to farmers affected by the natural calamities, the interest subvention of 2 per cent will continue to be available to Banks for the first year on the restructured amount. From the second year onwards such loans attract normal interest rate as per RBI guidelines.


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