E-Paper
Relief for farmers as Centre extends short-term loan payment date to May 31
Only farmers with a record of timely repayments get short-term crop loans at a concessional rate. Therefore, farmers who missed payments due after March 1 won’t have to pay any penalty if they repay by May 31.
The Centre has decided that farmers who availed of short-term crop loans at a concessional interest of 4% per annum and whose payment was due on March 1 or later will get time till May 31 to repay their loans.
Only farmers with a record of timely repayments get short-term crop loans at a concessional rate. Therefore, farmers who missed payments due after March 1 won’t have to pay any penalty if they repay by May 31.
Farmers get crop loans at a cheaper 7% as compared to consumer loans, which range from anything between 12% and 14%. For those making timely repayments, the effective rate of interest is even lower at 4%. The latest measure will benefit these categories of farmers.
“Due to 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. Moreover, due to restrictions on movement of people and difficulty in timely sale and receipt of payment of their produce, farmers may be facing difficulties in repayment of their short term crop loans falling due during this period,” an official statement said.
Under priority lending norms of the Reserve Bank, banks provide concessional crop loans to farmers through banks with 2% interest subvention to banks and 3% additional benefits for those who make timely repayment to farmers, thus disbursing agricultural credit at an effective rate of 4% annually.
Loans which have a ceiling of ₹3 lakh will come under this extended repayment period. The government subsidises short-term crop loans to make farming cheaper. Moreover, banks must necessarily lend to farmers because agriculture is a “priority lending sector”. For instance, all scheduled commercial banks must direct 40% of their adjusted net bank credit towards priority sector lending.
According to a 2018 National Bank for Agriculture and Rural Development survey, “more than one in two agricultural households surveyed in 2018” had availed of some loan. The size of debt owed by them was nearly equal to their annual incomes.
