Additional Interest Subvention scheme 2014-15: Reward for prompt repayment of crop loan

Commercial Banks are eligible to claim interest subvention of 2% p.a in respect of short term crop loans granted by them at 7% p.a to farmers in rural and semi-urban areas. The interest subvention will be allowed on the loan amount up to Rs.300000/- disbursed from the bank’s own source of funds. Interest subvention of 2% is calculated from the date of disbursement/drawal to the date of actual repayment of the crop loan or up to the due date of the loan whichever is earlier subject to a maximum period of one year.

As a reward, additional interest subvention of 3% p.a, will be available to farmers for prompt repayment of short term crop loans. The interest subvention will be calculated from the date of disbursement/drawal up to the date of actual repayment of the crop loan or up to the due date of the loan whichever is earlier subject to maximum period of one year. This suggests that prompt paying farmers would get short term crop loan @ 4% p.a during the year 2014-15.  The benefit would not accrue to those farmers who repay after one year of availing the loan.          

Interest subvention is also available to small and marginal farmers having Kisan Credit Card, for additional post-harvest period of up to 6 months to store their produce in warehouses. The benefit will be available at the same rate as available to crop loan against negotiable warehouse receipt. Further, the interest subvention of two percent will continue to be available to banks for the first year on the restructured amount to provide relief to farmers affected by natural calamities. Such restructured loans may attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.