Mumbai: The Reserve Bank on Thursday asked all banks to provide interest concession of 2 per cent on short term crop loans of up to Rs 3 lakh to farmers.
In a notification, the central bank said, "interest subvention of 2 percent per annum will be made available to the public sector banks and the private sector banks on their own funds used for short-term crop loans up to Rs 3 lakh per farmer provided the lending institutions make available short term credit at the ground level at 7 percent per annum to the farmers."
The government in the Budget for 2015-16 has proposed to implement interest subvention scheme in the current fiscal for short-term crop loans up to Rs 3 lakh.
"This 2 per cent interest subvention will be calculated on the crop loan amount from the date of its disbursement up to the date of actual repayment of the crop loan by the farmer or up to the due date of the loan fixed by the banks whichever is earlier, subject to a maximum period of one year," the notification said.
Besides, additional interest subvention of 3 percent will be available to farmers for repaying the loan promptly from the date of disbursement of the crop loan, it said.
This also implies that farmers paying promptly would get short term crop loans at 4 percent during the year 2015-16, RBI said.
This benefit would not accrue to those farmers who repay after one year of availing of such loans, it added.
"In order to discourage distress sale by farmers and to encourage them to store their produce in warehouses against receipts, the benefit of interest subvention will be available to small and marginal farmers having Kisan Credit Card for a further period of up to six months post-harvest on the same rate as available to crop loan against negotiable warehouse receipt for keeping their produce in warehouses," it said.
To provide relief to farmers affected by natural calamities, it said, the interest subvention of 2 percent will continue to be available to banks for the first year on the restructured amount.
Such restructured loans may attract normal rate of interest from the second year onwards as per the policy laid down by the RBI, it said.
