As per the information provided by the Minister of State for Ministry of Agriculture & Farmers Welfare Shri Parshottam Rupala, with a view to ensure availability of agriculture credit (including loans taken against Kisan Credit Card) at a reasonable cost/at a reduced rate of 7% per annum to farmers, the Government of India, is implementing an interest subvention scheme of 2% for short term crop loans up to Rs.3 lakh.
This scheme is implemented through public sector banks and private sector banks (reimbursement through RBI), Regional Rural Banks and Cooperatives (reimbursement NABARD).
However, now besides 2% interest subvention, the farmers, on prompt repayment of crop loans on or before the due date, are also provided 3% additional interest subvention. Therefore, in case of prompt payee farmers the short term crop loans are provided at an effective interest rate of 4% per annum.
The benefit of interest subvention is extended for a period of up to 6 months (post-harvest) to small and marginal farmers having KCC on loan against negotiable warehouse receipts with the purpose of preventing distress sale of produce.
According to the extant policy crop loans up to Rs.3.00 lakh per farmer provided by District Central Co-operative Banks and Primary Agricultural Co-operative Societies at 7% per annum are eligible for refinancing (through State Cooperative Banks/District Central Co-operative Banks) from NABARD out of STCRC fund allocated by Government of India every year.
In terms of the extant Interest Subvention Scheme on short-term crop loans, loans are made available to the farmer at 7% per annum and on prompt repayment, an incentive of 3% is credited to the farmer’s account.
While the benefit of interest subvention is passed on upfront to the borrower farmer by banks, the reimbursement of audited claims received from banks through Reserve Bank of India in respect of Commercial Banks and NABARD in respect of Cooperative Banks and Regional Rural Banks is made by Government of India on the basis of available budgetary resources.
Currently, the Union Government is not considering any proposal to provide funds equal to 90% of the interest subvention to the financial institutions as advance.
