Cloud over Subsidy may Prod Banks to Scrap Gold-agri Loan

April 9, 2015 Posted by admin

KOCHI:Gold-agri loan, a short-term low-interest loan that is very popular among farmers in the State, faces uncertainty with some leading banks deciding not to renew such loans or sanction fresh loans from April 1 as confusion prevails on whether the Centre would provide subsidy on such lending, or not. Bank officials said the confusion emerged after the Union Budget presented last month did not explicitly mention the amount allotted for ‘interest rate subvention’ on gold-agri loans, leading to speculation that there could be plans to scrap the popular scheme.

The actual rate of interest on gold-agri loans is nine per cent. The Centre pays two per cent as interest subsidy and another 3 per cent as interest rate subvention, making the effective rate the borrower pays for gold-agri loans only four per cent. The benefit of this loan, which has a tenure of 12 months and sanctioned for ‘running expenses’ such as purchase of fertilisers will be accrued only to farmers who make prompt payment.

“The Union Budget has not explicitly mentioned anything about the amount set aside for gold-agri loan, which has triggered the speculation,” said SBT Employees Union assistant secretary K S Krishna. Under the scheme, farmers can avail crop loans up to a principal amount of Rs 3 lakh. Some banks insist on seeing title deeds for sanctioning the loan (farmers can claim the maximum loan amount of Rs 3 lakh only if they produce the title deed for three acres of land). Officials of some leading banks told ‘Express’ that they were asked not to sanction fresh loans, or renew the existing loans until further notification from head office. An official of Indian Bank earlier said that the bank would disburse the loan at four per cent and claim the interest rate subvention and subsidy from the Centre. “We have been asked to charge 7 per cent interest from April 1. If the Centre decides to continue with the scheme, the borrowers can c laim the remaining amount,” he explained. Rakesh Agarwal, joint secretary to the Finance Ministry said short-term agricultural loans would continue to bear four per cent interest rate. 

Article source:

Leave a Reply

Your email address will not be published. Required fields are marked *