The Hindu Business Line : Interest subvention hiked on farm loans

Mumbai, Dec. 3 The Union Government has approved higher interest subvention of 3 per cent per annum as against 2 per cent per annum announced earlier to public sector banks (PSBs), co-operative banks and Rural Regional Banks (RRBs) in respect of short-term production credit of up to Rs 3 lakh provided to farmers for the year 2008-09.

This subvention is available to the banks on the condition that they make available short-term credit at the ground level at 7 per cent/ annum.

The amount of subvention is calculated on the amount of the crop loan disbursed from the date of disbursement/drawal up to the date of repayment or up to the date beyond which the outstanding loan becomes overdue, i.e. March 31, 2009 for kharif and June 30, 2009 for rabi, respectively, whichever is earlier.

According to a circular issued by the RBI in July 2008, banks are required to submit their claims on a half-yearly basis as at September 30, 2008 and March 31, 2009 , and on a quarterly basis as at June 30, 2009 (for rabi), within one month from the respective dates in order to enable the Government to provide subvention.

The claims for the half-year ending March 31, 2009 and quarter ending June 30, 2009 have to be accompanied by a Statutory Auditor’s certificate certifying that the claims for subvention for the entire year ended March 31, 2009 and quarter ending June 30, 2009 as true and correct. Final settlement of the claims would be done only on receipt of this certificate.

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