ERODE: Farmers already reeling under severe drought are in for more trouble with the Central government delaying notification of interest subvention scheme, which provides three per cent cushioning on farm loan interest on prompt repayment, fears Thamizhaga Vivasayigal Sangam State president K C Rathnasamy. While there is still no official word on the future of the scheme, the Sangam leader citing sources claimed the Central government recently issued an order, directing banks to inform farmers about cancellation of interest subvention scheme.
Farm loans are given away at 9 per cent interest, but they come with an immediate subsidy of 2pc, so the effective rate in 7pc.
Speaking to Express, Rathnasamy said that farm loans availed from nationalised banks attract seven per cent interest rate, of which three per cent is borne by the Centre in case of prompt repayment. With the ‘new directive’ kicking in, farmers now would have to shoulder the entire interest component burden, he said. In the case of loans from co-operative banks, farmers pay zero interest if the repayment happens on time: 3pc Central subvention and 4pc paid by the State government.
Urging the Centre to take into consideration the agrarian distress, Rathnasamy sought total interest waiver to help farmers mitigate the crisis. According to him, the present directive is a double whammy to the prospects of farmers, who still are struggling to get right price for their produces as per the recommendation of Dr M S Swaminathan Committee.
Detailing the systemic problems faced by farmers, Rathnasamy said that miserly monsoons followed by onset of summer have left water channels dry. “Whatever was salvaged by dint of hard work is not fetching right price due to low procurement price fixed by both the Centre and the State. This crisis might force them to quit farming or worse, result in suicides,” Rathnasamy said.
No official word yet on scrapping the scheme
ERODE: While panic is slowly gripping the agrarian community over the future of the interest subvention scheme, Erode District Lead Bank (Canara Bank) manager M Selvaraju sought to downplay the fear, saying there has been only a delay. An unprecedented dry spell has laid waste crops on thousands of acres across the State, with farmers even taking their agitation to New Delhi to catch Centre’s eye. A delay in announcement in such circumstances has only exacerbated fears of the farmers. However, Selvaraju says there has been no communication on scrapping of the scheme.
“Banks here have not received any communication on extension of interest subvention scheme. Every year, an order is issued by the Centre, through which it shoulders at least 5 per cent interest component on farm loans. Last year, we received the order by May-end. I would verify with the RBI if any order has been issued to stop the interest subsidy,” he said.
Meanwhile, bankers, on condition of anonymity, said that an announcement on subvention scheme ought to be made before the start of a financial year. During UPA regime, such announcements were made in the Union budget, letting the farmers in on what to expect in a year. However, the practice has been dropped by the current dispensation.
Giving an insight into how the scheme works, bankers said, as per the RBI guidelines, each bank has specific Marginal Cost of Funds-based Lending Rate (MCLR). For crop loans, the universally-accepted lending rate is nine per cent. Of the nine, two per cent subsidy is given at the onset for loans up to `3 lakh. The subvention scheme adds a cushion of three per cent on prompt repayment. This brings the interest burden on farmers to four per cent. As per the Centre’s notification, the term of the scheme ended on March 31. With no word on its extension, banks began directing staff to collect nine per cent interest from April 1.
Nitty-gritty
As per the RBI guidelines, each bank has specific Marginal Cost of Funds-based Lending Rate (MCLR) . For crop loans, the universally-accepted lending rate is nine per cent. Of the nine, two per cent subsidy is given at the onset for loans up to D3 lakh. The subvention scheme adds a cushion of three per cent on prompt repayment