1. Short Term Agricultural Credit: In order to provide short term credit (Crop Loans, PAGCC, Kisan Vikas Cards, Rythu Mitra Groups, Joint Liability Groups, Agricultural Gold Loans and Working Capital Loans financed to Fisheries) to the farmers at reasonable interest rate, Government of India announced a scheme of Interest Subvention in the year 2006. Under this, farmer receives short term credit at 7% p.a. from the date of disbursement to the end of the respective season with an upper limit of `3 lakh on the amount. Now the benefit is extended to small and marginal farmers availing loans against negotiable warehouse receipts (up to 6 months) and restructured crop loans (CCATL) on account of natural calamities. However, Agricultural Medium Term Loans are not covered under this scheme. Government will provide Interest Subvention to the banks (PSBs, RRBs, and Farmers Service Co-operative Societies) on the amounts financed to farmers (short term).

Banks lending to short term agricultural credit are eligible to claim 2% Interest Subvention from Government of India. Further, farmers are eligible for another 3% interest subvention who repays the loan promptly. This additional subvention is available to Public Sector Banks on the condition that the effective rate of interest on short term production credit up to `3 lakh for such farmers will be 4% p.a. Branches are required to submit claim half-yearly (September & March) for reimbursement of interest subvention amount from RBI. For crop loans up to one lakh disbursed in AP State attracts zero interest rate as state government is reimbursing the entire interest to the banks for prompt payment. Further, RBI has advised the Banks to ensure that all crop loans against which they are claiming interest subvention should satisfy that the borrower should be a farmer; the rate of interest charged should not exceed the rate stipulated by the GOI; the amount of loan is fixed according to the prescribed scale of finance for agricultural loans and the loan is used for stated purpose and seasonality is observed in regard to both disbursement and recovery. In order to extend interest subvention benefit to the genuine farmers, linking of Aadhaar number in the Customer ID is made mandatory for all short term crop loans such as stated above w.e.f 1st April 2017.


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