Farmers can avail crop loans at 7 per cent, Aadhaar link a must: RBI

In line with the government's policy, the RBI on Wednesday said farmers can avail of short-term crop loans of up to Rs 3 lakh at subsidised interest rate of 7 per cent that could go down to 4 per cent on prompt repayment.

"To ensure hassle-free benefits to farmers under the Interest Subvention Scheme, the banks are advised to make Aadhaar linkage mandatory for availing of short-term crop loans in 2017-18," the RBI said in a notification to banks.

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 during 2017-18, it has been decided to offer interest subvention of 2 per cent to banks in respect of loans given by their rural and semi-urban branches only on use of their own resources.

This interest subvention of 2 per cent will be calculated on the crop loan amount from the date of its disbursement up to the date of actual repayment by the farmer or up to the due date of the loan fixed by the banks, whichever is earlier, subject to a maximum of one year, it said.

An additional interest subvention of 3 per cent per annum will be available to "prompt payee farmers". "This also implies that the farmers paying promptly as above would get short-term crop loans at 4 per cent per annum during 2017-18," it said.

In order to discourage distress sale and encourage farmers to store produce in warehouses, it said the benefit of subvention will be available to small and marginal farmers with Kisan Credit Cards for a further period of up to 6 months post harvest at the same rate as available to crop loans against negotiable warehouse receipts. The warehouses should be accredited with the Warehousing Development Regulatory Authority (WDRA), it said.

To provide relief to farmers affected by natural calamities, an interest subvention of 2 per cent per annum will be made available to banks for the first year on the restructured loan, it said, adding that such loans will attract normal rate of interest from the second year onwards.

To avoid multiple loaning and ensure only genuine farmers avail of concessional crop loans through the mechanism of gold loans, the lending institutions may conduct due diligence and ensure proper documentation, including recording of land details, even when the farmer takes gold loans for such purposes, it said.

Earlier in June, the Cabinet headed by Prime Minister Narendra Modi had approved the interest subvention scheme for 2017-18. The Cabinet has approved total expenditure of Rs 20,339 crore for this fiscal as interest subsidy on short-term crop loans.