Interest subvention scheme for short-term Crop loans 2019-20

The Reserve Bank of India (RBI) on Monday (26.08.2019) announced modalities for providing 2 per cent interest subsidy on short-term loans of up to Rs 2 lakh for farmers engaged in fisheries and animal husbandry through Kisan Credit Card (KCC). With this interest subvention, such farmers will get short-term loan of up to Rs 2 lakh at a concessional rate of 7 per cent. The interest subsidy scheme is applicable for loans taken during 2018-19 and 2019-20. Farmers paying the loans promptly will be eligible for another three per cent discount on the interest rate.This also implies that the farmers repaying promptly would get short-term loans at the rate of 4 per cent per annum during 2018-19 and 2019-20.

How it works?

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 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.