RBI Provides 60-Day Grace Period For Farmers’ Interest Subvention Scheme
RBI gives farmers a grace period of 60 days on interest subvention scheme.
In light of cashflow problems arising out of demonetisation, the Reserve Bank of India on Monday said that farmers will get a 60-day grace period on loan repayments to be eligible for the government’s interest rate subvention scheme on short-term crop loans. Under the scheme, farmers who repay their loans promptly are eligible for an additional interest subvention of 3 percent over and above a 2 percent subvention available to all farmers.
It has been decided by the Government of India to provide an additional grace period of 60 days for prompt repayment incentive of 3 percent to those farmers whose crop loan dues are falling due between 1st November, 2016 and 31st December, 2016 if such farmers repay the same within 60 days from the above period.RBI Notification
In November, the RBI had provided relief to small borrowers and firms that were finding it difficult to repay loans after the government’s decision to withdraw Rs 500 and Rs 1000 notes from circulation resulted in a cash crunch. It offered an additional 60 days to certain categories of borrowers to make good on their loans.
The RBI has advised banks to take the relaxation into account when making consolidated claims for the 3-percent subventions paid out during the financial year ending March 2017.
This is a far more nuanced measure than the earlier one. This will be beneficial to those that have the wherewithal to pay, but are unable to on account of the cash crunch.Ratna Vishwanathan, CEO, Microfinance Institutions Network
The grace period with respect to classification of loans as non-performing has been misused in several places on account of vested interests, Vishwanathan said.
The pan-India average for the collections shortfall for micro-finance institutions is around 20 percent, she said. However, in certain areas like Uttar Pradesh, and districts of Maharashtra, Madhya Pradesh, Karnataka, and Uttarakhand, the shortfall is much higher than the national average.