RBI makes Aadhar linkage mandatory for farmers to avail short-term crop loans in 2017-18

The Reserve Bank of India (RBI) on 16 August 2017 made Aadhar linkage mandatory for farmers who wish to avail short-term crop loans in 2017-18.

In its, notification RBI has said, “To ensure hassle-free benefits to farmers under Interest Subvention Scheme, the banks are advised to make Aadhar linkage mandatory for availing short-term crop loans in 2017-18.”

RBI has clarified that farmers can avail of short-term crop loans of up to Rs 3 lakh at the subsidised interest rate of 7 per cent that could go down to 4 per cent on prompt repayment.

Highlights of RBI’s notification related to Interest Subvention Scheme for Short Term Crop Loans during the year 2017-18

• An interest subvention of 2 per cent per annum will be offered to lending institutions viz. Public Sector Banks (PSBs), Private Sector Commercial Banks (in respect of loans given by their rural and semi-urban branches only) on the use of their own resources. This subvention will be provided on the short-term crop loans up to Rs 3 lakh to farmers at an interest rate of 7 per cent per annum during the year 2017-18.

• The notification says, “This interest subvention of 2 per cent will be calculated on the crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of the crop loan by the farmer or up to the due date of the loan fixed by the banks whichever is earlier, subject to a maximum period of one year.”

• The notification says, an additional interest subvention of 3 per cent will be available for those who pay their pay dues on time. This also implies that the farmers paying promptly as above would get short term crop loans @ 4 per cent per annum during the year 2017-18.

• The notification also has something for farmers affected by natural calamities. The notification reads, “To provide relief to farmers affected by natural calamities, an interest subvention of 2 percent per annum will be made available to banks for the first year on the restructured loan amount. Such restructured loans will attract a normal rate of interest from the second year onwards.”

Meanwhile, in order to discourage distress sale and encourage farmers to store produce in warehouses, banks will provide subvention benefit to small and marginal farmers with Kisan Credit Cards for a further period of up to 6 months post-harvest.
The notification was issued after the union government approved the implementation of the Interest Subvention Scheme for the year 2017-18 for short term crop loans up to Rs 3 lakhs.

Comment: It seems that the move is in line with the union government’s plan to link Aadhaar to almost all transactions in the economy like getting direct benefit transfer and filing of Income Tax returns.