Govt extends interest subvention on crop loans till May-end

In view of the lockdown to combat coronavirus, the government has decided to continue the facility of interest subvention of 2 per cent and prompt repayment incentive of 3 per cent to farmers till May 31, 2020, the RBI said on Tuesday.

In a notification, the Reserve Bank of India (RBI) has askeanks to extend the benefit of interest subvention (IS) and prompt repayment incentive (PRI) for short-term crop loans to farmers.

In the wake of the nationwide lockdown due to outbreak of COVID -19 pandemic and the resultant restrictions imposed on movement of people, many farmers are not able to travel to bank branches for payment of their short-term crop loan dues, it said.

According to the RBI circular of March 27, 2020, regarding COVID-19 Regulatory Package, moratorium has been granted for three months on payment of installments falling due between March 1, 2020 and May 31, 2020 in respect of all term loans including short-term crop loans.

"Accordingly, to ensure that farmers do not have to pay penal interest and at the same time continue getting the benefits of interest subvention scheme, the government has decided to continue the availability of 2 per cent IS and 3 per cent PRI to farmers for the extended period of repayment up to May 31, 2020 or date of repayment, whichever is earlier, for short term crop loans up to Rs 3 lakh per farmer which have become due between March 1, 2020 and May 31, 2020," the RBI said.

The nationwide lockdown imposed on March 25 to contain spread of coronavirus has now been extended to May 3.

Banks, as per the notification issued on Tuesday, are advised to extend the benefit of IS of 2 per cent and PRI of 3 per cent for short term crop loans upto Rs 3 lakh to farmers whose accounts have become due or shall become due between March 1, 2020 and May 31, 2020.

The move will be benefit the farmers as they will not be deprived of either interest subvention or PRI up till May-end.

In order to provide short-term crop loans up to Rs 3 lakh to farmers at an interest rate of 7 per cent per annum the government offer interest subvention of 2 per cent per annum to banks.

An additional 3 per cent interest subvention is provided to farmers who pay their loans promptly. For such farmers, the effective interest rate is 4 per cent.