The interest subvention scheme for farmers aims at providing short term credit to farmers at subsidised interest rate. The policy came into force with effect from Kharif 2006-07. The scheme is being implemented for the year 2020-21.
The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks.
The Interest Subvention Scheme is being implemented by NABARD and RBI.
As a measure to check distress sale, post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) are available for upto 6 months for KCC holding small & marginal farmers. The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI.
In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e an effective interest rate of 7% for loans upto 6 months. Subvention (incentive) for prompt repayment will not be available to the farmers for loans extended against NWRs.
To provide relief to the farmers affected by Natural Calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount. Such restructured loans will attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.
However, to provide relief to farmers affected by severe natural calamities, Interest Subvention of 2% will be available to Banks for the first three years/entire period (subject to a maximum of five years) on the restructured loan amount. Further, in all such cases, the benefit of prompt repayment incentive @3% per annum shall also be provided to the affected farmers. The grant of such benefits in cases of severe natural calamities shall, however, be decided by a High-Level Committee (HLC) based on the recommendation of Inter-Ministerial Central Team (IMCT) and Sub Committee of National Executive Committee (SC-NEC).
Source : NABARD
The Ministry of Rural Development, Government of India launched a new programme known as National Rural Livelihoods Mission (NRLM) by restructuring and replacing the Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme with effect from April 01, 2013. NRLM was renamed as Deendayal Antyodaya Yojana – National Livelihoods Mission (DAY-NRLM) with effect from March 29, 2016.
DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihood services.
DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of Rs 3,00,000 per SHG. This will be available across the country in two ways:
To offset the economic impact of Covid-19 on Dairy Sector, Ministry of Fisheries, Animal Husbandry and Dairying has introduced a new scheme “Interest subvention on Working Capital Loans for Dairy sector” for Supporting Dairy Cooperatives and Farmer Producer Organizations engaged in dairy activities (SDC&FPO) for implementation during 2020-21.
In order to meet the working Capital needs of the Cooperatives and Farmer owned milk producer companies, Interest subvention will be given on working capital loan taken from scheduled Commercial Banks/R.R.Bs/Cooperative Banks/Financial Institutions between 1st April 2020 and 31st March 2021 by Cooperatives/FPOs for conversion of milk into conserved commodities and other milk products.
The scheme has made provisions for providing interest subvention of 2% per annum, with an additional incentive of 2% per annum interest subvention to be given in case of prompt and timely repayment/interest servicing.
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. As per RBI circular dated 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, Government has decided to continue the availability of 2% IS and 3% PRI to farmers for the extended period of repayment upto 31.08.2020 or date of repayment, whichever is earlier, for short term crop loans upto Rs 3 lakh per farmer which have become due between March 01, 2020 and August 31, 2020.
Source : RBI