Lok Sabha Question No. 3454 (UNSTARRED), answered on 2019-07-15
Subject: Interest-free Loan to Farmers
Ministry: FINANCE
Asked by: Sanjay Haribhau Jadhav

## Government of India Ministry of Finance

## LOK SABHA UNSTARRED QUESTION NO. 3454

ANSWERED ON-15.07.2019 (Monday)/Ashadha, 24, 1941 (Saka)

## INTEREST-FREE LOAN TO FARMERS

## †3454. SHRI SANJAY HARIBHAU JADHAV:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to provide interest-free loan to the farmers facing crop damage due to untimely rainfall in the country;
- (b) whether the Government is fixing any such criteria under which each farmer gets loan uniformly, if so, the details thereof;
- (c) whether the banks and cooperative credit institutions are not providing fresh loan to the farmers for Kharif  season,  if  so,  the  details  thereof  and  the  corrective  action  taken  by  the  Government  in  such cases, bank/credit/institution-wise; and
- (d) the other steps taken/being taken by the Government for providing hassle free loan to the farmers?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ANURAG THAKUR)

- (a) to (d): Government fixes agriculture credit disbursement targets for the banking sector every year. Details of agriculture credit disbursement by banks during the last three years as reported by National Bank for Agriculture and Rural Development (NABARD) are as under:

(Amount in ` crore)

| Year     | Amount       |
|----------|--------------|
| 2016-17  | 9,15,509.92  |
| 2017-18  | 10,65,755.67 |
| 2018-19* | 12,54,762.20 |

With a view to ensure  availability  of  agriculture  credit  at  a  reduced  interest  rate  of  7%  p.a.  to  the farmers, 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. The scheme  provides  interest  subvention  of  2%  per  annum  to  Banks  on  use  of  their  own  resources. Besides, additional 3% incentive is given 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 the 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  InterMinisterial Central Team (IMCT) and Sub Committee of National Executive Committee (SC-NEC).

The  Government  of  India/  Reserve  Bank  of  India  (RBI)/  NABARD  have,  inter  alia,  taken  the following major initiatives for providing hassle free crop loans to farmers of the country.

-  The Kisan Credit Card (KCC) Scheme, 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.

The credit limit/ loan amount under KCC is fixed by Banks as per guidelines prescribed in the Master Circular dated July 4, 2018 issued by RBI. The short term credit limit under KCC for the first year is determined based on Scale of Finance for the crop (as decided by District Level Technical Committee) x Extent of area cultivated + 10% of limit towards post-harvest/household/ consumption requirements +  20%  of  limit  towards  repairs  and  maintenance  expenses  of  farm  assets  +  crop  insurance  and/or accident insurance including personal accidental insurance scheme (PAIS), health insurance & asset insurance. The limit for second and subsequent years (3rd, 4th and 5th year) is arrived based on first year limit for crop cultivation purpose plus 10% of the limit towards cost escalation / increase in scale of finance and estimated term loan component for the tenure of Kisan Credit Card, i.e., five years. The short term loan limit arrived for the 5 th  year plus the estimated long term loan requirement will be the Maximum Permissible Limit (MPL) and is to be treated as the Kisan Credit Card limit.

Under the KCC Scheme, a flexible limit of ` 10,000 to ` 50,000 has been provided to marginal farmers (as Flexi KCC) based on the land holding and crops grown including post harvest warehouse storage related  credit  needs  and  other  farm  expenses,  consumption  needs,  etc.,  plus  small  term  loan investments without relating it to the value of land.

-  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. A sub-target of 8% is also prescribed for lending to small and marginal farmers including landless agricultural labourers, tenant farmers, oral lessees and share croppers. Similarly, in the case of Regional Rural Banks 18% of their total outstanding advances is required  to  be  towards  agriculture  and  a  sub-target  of  8%  has  been  set  for  lending  to  small  and marginal farmers.
-  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.