Interest Free Loans to Farmers in UP

Reserve Bank of India (RBI) has issued directions for Relief Measures to be provided by respective lending institutions in areas affected by natural calamities which, inter alia, include, restructuring/rescheduling of existing crop loans and term loans, extending fresh loans, relaxed security and margin norms, moratorium, etc. These directions have been so designed that the moment calamity is declared by the concerned District Authorities, they are automatically set in motion without any intervention, thus saving precious time. The benchmark for initiating relief measures by banks has also been reduced from 50% to 33% crop loss in line with the National Disaster Management Framework. Banks have also been advised not to insist for additional collateral security for restructured loans.

With a view to ensuring availability of agriculture credit at a reduced interest rate, the Government of India in the Department of Agriculture, Cooperation and Farmers’ Welfare (DAC&FW) implements an interest subvention scheme for short term crop loans up to ₹ 3.00 lakh, which provides interest subvention of 2% per annum to Banks on use of their own resources, and,  an additional 3% incentive to the farmers for prompt repayment of the loan, thereby reducing the effective rate of interest to 4%. Under the aforesaid interest subvention scheme, to provide relief to farmers affected by natural calamities, the interest subvention (2%) on crop loan continues to be available to banks for the first year on the restructured amount. Such restructured loans may however, attract normal rate of interest from the second year onwards as per policy laid down by the Reserve Bank of India (RBI).

In order to provide relief to the farmers affected due to severe natural calamities, the Government in DAC&FW has decided that interest subvention of 2% per annum will be made available to banks for first three years/entire period (subject to a maximum of five years) on the restructured loan amount, and in all such cases the benefit of prompt repayment incentive at 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).

State Level Bankers’ Committee (SLBC), Uttar Pradesh has reported that there was no natural calamity in the State of Uttar Pradesh during Financial Year 2018-19 and therefore no State Government notification was issued in this regard.

The Government of India/ RBI/ National Bank for Agriculture and Rural Development (NABARD) have, inter alia, taken the following major initiatives for providing hassle free crop loans to farmers :-

• Government fixes agriculture credit disbursement targets for the banking sector every year and banks have consistently surpassed these targets.
• As per RBI directions, Domestic Scheduled Commercial Banks are required to lend 18% of the Adjusted Net Bank Credit (ANBC) or Credit Equivalent to Off-Balance Sheet Exposure (CEOBE), whichever is higher, towards agriculture.
• The Government has introduced the Kisan Credit Card (KCC) Scheme, which enables farmers to purchase agricultural inputs such as seeds, fertilisers, pesticides, etc. and draw cash to satisfy their agricultural and consumption needs. The KCC Scheme has since been simplified and converted into ATM enabled RuPay debit card with, inter alia, facilities of one-time documentation, built-in cost escalation in the limit, any number of drawals within the limit, etc.
• To enhance coverage of small and marginal farmers in the formal credit system, RBI has decided to raise the limit for collateral-free agriculture loans from ₹ 1 lakh to ₹ 1.6 lakh.
• The requirement of 'no due’ certificate has also been dispensed with for small loans up to ₹ 50,000 to small and marginal farmers, share-croppers and the like and, instead, only a self-declaration from the borrower is required.
• To bring small, marginal, tenant farmers, oral lessees, etc. into the fold of institutional credit, Joint Liability Groups (JLGs) have been promoted by banks.

This was stated by the Union Minister of Finance & Corporate Affairs, Smt. Nirmala Sitharamanin a written reply to a Parliament Question in Rajya Sabha