RBI notified Interest Subvention Scheme 2015-16 of Union Government for banks

Reserve Bank of India on 13 August 2015 notified the Union Budget-2015-16 Interest Subvention Scheme (ISS) and asked all banks to provide interest concession of 2 percent on short term crop loans of up to 3 lakh rupees.

The central bank in its notification said that interest subvention of 2 percent per annum will be made available to public and private sector banks provided they lend short term credit at the ground level at 7 percent per annum to farmers.

The bank said that additional interest subvention of 3 percent will be available to farmers for repaying the loan promptly from the date of disbursement of the crop loan. This implies that farmers paying promptly would get short term crop loans at 4 percent during the year 2015-16.

To provide relief to farmers affected by natural calamities, the Reserve Bank has said that interest subvention of 2 percent will continue to be available to banks for the first year on the restructured amount. However, such restructured loans may attract normal rate of interest from the second year onwards.

Background
The government in the Budget for 2015-16 proposed to implement interest subvention scheme in the 2015-16 fiscal for short-term crop loans up to 3 lakh rupees. After that, the Union Government on 21 July 2015 extended ISS to Public Sector Banks (PSBs), private sector commercial banks, rural regional banks (RRBs), cooperative banks and NABARD.

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