RBI asks banks to submit interest subvention estimates

The Reserve Bank of India (RBI) today asked banks to submit their estimates for credit to be given to farmers under the interest subvention scheme in the 2010-11 fiscal, so that the government has an idea of the amount likely to be doled out.

"Banks are advised to immediately submit their estimates of short-term production credit to farmers up to Rs 3 lakh during the year 2010-11 to allow us to provide the government with an estimate of the likely amount of subvention," the RBI said in a circular.

In the 2010-11 Budget, Finance Minister Pranab Mukherjee had announced a scheme wherein interest subvention of up to 2 per cent would be given to farmers who pay back their short- term loans on schedule.

In the previous Budget, the subvention percentage was fixed at 1.5 per cent.

The effective rate of interest at which farmers will be able to avail their loans is 5 per cent.

"Banks may give adequate publicity to the above scheme so that farmers can avail the benefits," the RBI said.

The RBI further advised banks to submit their claims for 1.5 per cent interest subvention on a half-yearly basis -- that is, on September 30, 2010, and March 31, 2011 -- while in the case of 2 per cent additional subvention, banks are to submit a one-time consolidated claim by April 30, 2012.