Latest News! Centre Extends Interest Subvention on Crop Loans till 31 May Due to Ongoing Lockdown

The Reserve Bank of India on Tuesday informed that Centre has decided to continue the facility of interest subvention of 2% and prompt repayment incentive of 3% to farmers till 31^st May 2020.

The RBI, in a notification has asked all the banks to extend the benefit of interest subvention (IS) as well as prompt repayment incentive (PRI) for short-term crop loans to the cultivators.

In the wake of the nationwide lockdown because of Coronavirus pandemic and restrictions imposed on movement of people, many farmers are not able to come to their respective banks for payment of their short-term crop loan dues, RBI said.

RBI’s circular dated 27^th March 2020 said regarding COVID-19 Regulatory Package, moratorium has been given for 3 months on payment of instalments that will fall due between 1 March 2020 and 31 May 2020 regarding all term loans including short-term crop loans.

The RBI said, "Accordingly, to make sure that farmers do not have to give penal interest and at the same time continue getting the benefits of interest subvention scheme, the Centre has decided to continue the availability of 2% IS and 3% PRI to cultivators for the extended period of repayment up to 31^st May, 2020 or repayment date, whichever is earlier, for short term crop loans up to Rs 3 lakh/farmer which was due between 1 March 2020 and 31 May 2020".

It further said that banks, as per the notification issued on 21^st April 2020 are advised to extend the benefit of IS of 2% and PRI of 3% for short term crop loans up to Rs 3 lakh to the farmers whose accounts have become due or shall become due between 1 March 2020 and 31 May 2020.

The latest move is said to benefit many farmers as they will not be deprived of either interest subvention or prompt repayment incentive up till May-end.

So as to provide short-term crop loans up to Rs 3 lakh to farmers at an interest rate of 7% per annum, Central government offer interest subvention of 2% per year to banks. An additional 3% interest subvention is given to farmers who pay their loans on time. For those farmers, the effective interest rate is 4%.