Hereafter short term crop loans extended only through KCC is eligible for interest subvention scheme

Reserve bank of India advised all the scheduled commercial banks that with effect from April 1, 2020, Short Term Crop Loans should be extended only through KCC to be eligible for Interest Subvention Scheme (ISS) and Prompt Repayment Incentive (PRI). According to the notification, the Ministry of Agriculture & Farmers Welfare vide their Office Memorandum, No. F. 1-20/2018-Credit-I, dated January 23, 2020, has advised in this regard that Short Term Crop Loans eligible for Interest Subvention Scheme (ISS) and Prompt Repayment Incentive (PRI) should be extended only through KCC thus making KCC a prerequisite for claiming Interest Subvention (IS) and Prompt Repayment Incentive (PRI) by farmers w.e.f. April 1, 2020. Reimbursement of interest subvention for Short Term Crop Loans through non-KCC accounts shall not be considered beyond March 31, 2020, it said. Schedule commercial Banks (Excluding Regional Rural Banks and Small Finance Banks) are also advised by the Central bank that the existing Short Term Crop Loans which are not extended through KCC shall be converted to KCC loans by March 31, 2020, to be eligible under ISS and PRI scheme.

The commercial banks (both public and private) are eligible for interest subvention at the rate of 2 percent 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.  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 percent per annum. The interest subvention amount is calculated from the date of the loan availed to the date of closure of the loan. The benefit of interest subvention would not accrue to those farmers who repay after one year after disbursement of the 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. Related post:  How Kisan credit card (KCC) is useful to farmers?