The Economic Times dt.4/1/12: NEW DELHI: The Finance Ministry has launched a concessional loan scheme for farmers to prevent distress sale of agricultural produce.
Farmers who park their produce at warehouses will be able to avail short-term post harvest loan at 7% as against the prevailing rate of 11%-12%. Farmers making timely payment of the loans will further enjoy 3% interest subvention, bringing the real interest rate to 4%, according to the finance ministry directive.
This will benefit close to 100 million marginal and small farmers with kisan credit cards. "Now, a farmer will be able to get two crop loans in a year at a concessional rate," said a senior official with the National Bank for Agriculture and Rural Development (Nabard), which will implement the scheme.
The new scheme will ensure that the first crop loan taken by a farmer is converted into a produce marketing loan at a concessional rate. This will make the farmer eligible for a second concessional loan for the next season.
The loan will be available for up to six months against a negotiable warehouse receipt submitted to the bank. A negotiable warehouse receipt allows the transfer of ownership of a commodity stored in a warehouse without having to deliver the physical commodity.
The scheme will also boost the warehousing sector, the finance ministry believes. Earlier this week, the government had allowed Nabard to fully refinance bank loans at a lower interest rate in order to promote lending towards construction of warehouse facilities. There are 115 warehouses registered in the country.
Some bankers, however, see pitfalls in the scheme. "Banks will be under more pressure to recover the already high non-performing assets in the agricultural sector," a senior agriculture officer with a state-run bank said.
The government has set a target of Rs 4,75,000 crore towards agriculture loan this year. Bad loans in the sector stand at Rs 16,659 crore. The State Bank of India has the highest share of such loans, which were worth Rs 6,832 crore in September 2011.
Farmers who park their produce at warehouses will be able to avail short-term post harvest loan at 7% as against the prevailing rate of 11%-12%. Farmers making timely payment of the loans will further enjoy 3% interest subvention, bringing the real interest rate to 4%, according to the finance ministry directive.
This will benefit close to 100 million marginal and small farmers with kisan credit cards. "Now, a farmer will be able to get two crop loans in a year at a concessional rate," said a senior official with the National Bank for Agriculture and Rural Development (Nabard), which will implement the scheme.
The new scheme will ensure that the first crop loan taken by a farmer is converted into a produce marketing loan at a concessional rate. This will make the farmer eligible for a second concessional loan for the next season.
The loan will be available for up to six months against a negotiable warehouse receipt submitted to the bank. A negotiable warehouse receipt allows the transfer of ownership of a commodity stored in a warehouse without having to deliver the physical commodity.
The scheme will also boost the warehousing sector, the finance ministry believes. Earlier this week, the government had allowed Nabard to fully refinance bank loans at a lower interest rate in order to promote lending towards construction of warehouse facilities. There are 115 warehouses registered in the country.
Some bankers, however, see pitfalls in the scheme. "Banks will be under more pressure to recover the already high non-performing assets in the agricultural sector," a senior agriculture officer with a state-run bank said.
The government has set a target of Rs 4,75,000 crore towards agriculture loan this year. Bad loans in the sector stand at Rs 16,659 crore. The State Bank of India has the highest share of such loans, which were worth Rs 6,832 crore in September 2011.
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