The Reserve Bank of India on Wednesday notified the interest subvention scheme for short-term crop loans as announced by the government in the Budget.
Under the scheme, an interest subvention of 2% per annum will be made available to public sector banks (PSBs) and private sector scheduled commercial banks for short-term crop loans of up to R3,00,000 per farmer, provided banks lend at 7% per annum to farmers, said the notification.
In his Budget speech, finance minister P Chidambaram had said that the interest subvention scheme would be extended to private banks as part of the government’s plan to increase the agricultural credit target for FY14 to R7,00,000 crore from R5,75,000 crore in FY13.
The amount of interest subvention will be calculated on the crop loan amount from the date of disbursement to the date of repayment (or the due date for the loan). An additional interest subvention of 3% is being provided to farmers who pay back their loans in time, to encourage timely repayments. This implies that farmers who pay promptly would get short-term crop loans at 4% p.a. in 2013-14.
The benefits of interest subvention will also be available to small and marginal farmers having Kisan Credit Card for a period of up to six months post-harvest on the same rate as crop loans, against a negotiable warehouse receipt for keeping their produce, the RBI notification said.