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Interest subvention scheme for short-term Crop loans 2018-19

Interest subvention scheme for short-term Crop loans 2018-19


RBI vide its communiqué RBI/2017-18/190 FIDD.CO.FSD.BC.No.21/05.04.001/2017-18 dated June 7, 2018 advised all the Public & Private Sector Scheduled Commercial Banks as an interim measure, the Interest Subvention Scheme will be implemented in 2018-19 till further instructions are received from the Government, on the terms and conditions approved for the Scheme for 2017-18.

It is communicated  in the above circular that in terms of GOI advise, from 2018-19 the ISS is being put on DBT mode on ‘In kind/services’ basis and not on ‘In cash’ basis and all loans processed in 2018-19 are required to be brought on ISS portal/DBT platform, once it is launched. The communiqué further said that the Interest Subvention Scheme as Plan-Non plan categorization of schemes will be dispensed with for the Interest Subvention Scheme 2018-19,  and same will be required to be settled as applicable in Plan Scheme viz. Scheduled Caste (SC), Scheduled Tribe (ST) and North East Region (NER) etc. Therefore, banks are required to capture category-wise data (General, Scheduled Caste (SC), Scheduled Tribes (ST), North Eastern Region (NER)-General, North Eastern Region (NER)-SC, North Eastern Region (NER)-ST) of beneficiaries under the Scheme for reporting of the same on ISS portal individual farmer wise to settle the claims arising from 2018-19 onwards. Till such time the DBT portal becomes functional banks are requested to submit their claims, category-wise as indicated above.

The minor changes made in the scheme for the year 2017-18 and 2018-19  are as under.
1. Central Government will provide interest subvention of 5 per cent per annum to all prompt payee farmers for short term crop loan up to one year for loan upto Rs. 3 lakhs borrowed by them during the year 2017-18. Farmers,who would have to borrow at 9% will thus have to effectively pay only 4% as interest.
2. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5%  i.e an effective rate of 7%.
3.In order to give relief to the small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e. an effective interest rate of 7% for loans upto 6 months.
4. To provide relief to the farmers affected by natural calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount.

5. As per RBI notification no.FIDD.CO.FSD.BC.No.14/05.02.001/2017-18 dated August 16,2017, advised banks to make Aadhar linkage mandatory for availing short-term crop loans.

6.  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.

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.

The Central Bank further said that in consultation with Govt. it  is working on the detailed modalities regarding categorisation of loans. Till such time the modalities are finalised, banks may obtain the category-wise data on self-declaration basis. There should however be no cap on the loans given under each category.

(12) Comments

  1. P M Gade

    Dear Naik Sir, this is really a nice information you have shared. But I still have few questions about this scheme. How does exact amount of loan and interest is calculated in case if farmer has done loan repayment within one year (i.e. 365 days) but in a different financial year? e.g. If farmer has taken loan amount of Rs. 50,000/- on 10 August 2017 and he has planned to repay the loan amount in first week of August 2018, what will be the exact repayment amount? Whether he has to pay 4% interest or 7% interest on loan amount? Does this interest subvention scheme considers one year only as a same financial year or whole 365 days? Does the farmer should make the repayment on or before 31 March of the same financial year to avail the scheme benefits, irrespective of loan taken on which date?

    1. Surendra NaikSurendra Naik - Post author

      There is a slight change in the scheme for 2017-18.The interest will be charge at 9% by the bank.The Central Government will provide interest subvention of 5 per cent per annum to all prompt payee farmers for short term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them during the year 2017-18. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% an effective interest rate of 7% as against available above. Farmers will thus have to effectively pay only 4% as interest. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of only 2% an effective interest of 7% . The Central Government will provide approximately Rs. 20,339 crore as interest subvention for 2017-18. In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e. an effective interest rate of 7% for loans upto 6 months. To provide relief to the farmers affected by natural calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount. The scheme has been running since 2006-07. Under this, the farmers were availing concessional crop loans of upto Rs.3 lakh at 7% rate of interest hitherto. It also provides for an additional subvention of 3%. Prompt Repayment within a period of one year from the date of advance. As a measure to check distress sale, post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) are available for upto 6 months for KCC holding small & marginal farmers.

    2. Surendra NaikSurendra Naik - Post author

      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 (within 365 days) of availing such loans. For example a farmer taken the loan in August 1, 2017 shall close the loan before 31,July 2018 to be eligible for interest subvention. There is a minor changes in interest subvention scheme for the year 2017-18. I have updated the following salient feature of new scheme in my post in banking school which are as under. 1. Central Government will provide interest subvention of 5 per cent per annum to all prompt payee farmers for short term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them during the year 2017-18. Farmers will thus have to effectively pay only 4% as interest. 2. In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% i.e an effective rate of 7%. 3.In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e. an effective interest rate of 7% for loans upto 6 months. 4. To provide relief to the farmers affected by natural calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount.

  2. Shrikant

    Resp sir i have a small query regarding prompt repay interest subvention 3% If crop loan limit is Rs 1 lakh after 364 days Interest amt is Rs 7000/- due to 7% rate of interest Total amt due is Rs 107000/- Amount credited Rs 106999/-in loan crop loan accont Whether i am eligible for 3% int subvention or not

  3. Vilas Mahajan

    Dear Sir, My father had taken loan of the amount of 3 lakh on 11/11/2016 from Union Bank of India. He went to repay the loan amount on 10/11/2017 (on 365th day). But bank informed him that he is defaulter by 1 day and not eligible for 3% subvention. What he should do? Please guide us.

    1. Surendra NaikSurendra Naik - Post author

      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 one year AFTER disbursement of loan.Your father should have closed the loan on 10/11/2017 instead of listening to some staff members. As you are aware that loan is closed in one year and not after one year, you could have initiated complaint against the branch for not giving you benefit of interest subvention as per Government scheme.

  4. Balapppa

    Resp sir I have taken a crop loan from society bank Rs.12000/- and when I approach a corporation bank for KCC loan and the manager says you're already taken a crop loan, at time only one crop loan is eligible so please advise me am eligible or no?

    1. Surendra NaikSurendra Naik - Post author

      Crop loans can be availed by you only from one source. Since you have availed loan from a society you are not eligible for interest subvention. You may close the existing loan and approach a commercial banks (either public or private bank) next time to be eligible for interest subvention. Discuss with the bank manager in this regard.

      1. Surendra NaikSurendra Naik - Post author

        No problem in talking to me through e-mail. However, I advise you to join facebook group 'Banking 365' at URL https://www.facebook.com/groups/547920251943741/?ref=bookmarks, where besides me many senior bankers will answer your banking related queries.

  5. Pushpinder Duggal

    1. If a person has taken agriculture loan of Rs.10 Lacs, whether will he be eligible for subvention upto 3 lacs. 2. If bank is charging rate of interest higher than 9%, whether bank eligible for subvention.

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