Covid-19: Interest Subvention, Prompt Repayment Incentive on Crop Loans to Farmers Extended till 31 August

Here is another good news for the farmers. In view of the lockdown to fight Covid-19 pandemic, the Centre has decided to continue the facility of Interest Subvention (IS) of 2% and Prompt Repayment Incentive (PRI) of 3% to farmers till 31^st August 2020.

It must be noted that the facility of Interest Subvention & Prompt Repayment Incentive was extended in the month of April till May-end.

In a notification, the Reserve Bank of India (RBI) asked all lending institutions to extend the benefit of Interest Subvention & Prompt Repayment Incentive for short-term crop loans to the farmers.

RBI on 23^rd May 2020 had allowed all banks to extend moratorium on repayment of loans by another 3 months i.e. up to 31^st August 2020 due to the extension of lockdown and continuing disruption on account of Coronavirus pandemic.

RBI in the notification said that "In order to ensure that farmers do not have to pay higher interest during the extended moratorium period, the Centre has decided to continue the availability of 2% IS and 3% PRI to farmers for the extended period of repayment up to 31^st August 2020 or date of repayment, whichever is earlier".  

RBI further said that the benefit would be applicable to all short-term loans for Agriculture & Animal Husbandry, Dairy & Fisheries (AHDF) up to Rs 3 lakh / farmer (up to Rs 2 lakh for AHDF farmers).

So as to provide short-term crop loans up to Rs 3 lakh to cultivators at an interest rate of 7% per annum, the government offers interest subvention of 2% per annum to the banks.

Besides, an additional 3% interest subvention is given to farmers who pay their loans punctually. For such farmers, the effective interest rate is 4%.