Date:06/06/2006 URL: http://www.thehindubusinessline.com/2006/06/06/stories/2006060603780600.htm

Back Banks told to claim subsidy on farm credit every quarter

Our Bureau

Mumbai , June 5

Banks have been asked to claim the two per cent interest subsidy on farm credit announced in the Budget, on a quarterly basis, beginning the current quarter ending June 30.

In a circular issued to banks on Monday, the RBI also asked banks to provide estimate of short-term farm credit to be disbursed during (kharif and rabi seasons separately) 2006-07. This will enable RBI to provide the Government with the likely subsidy amount for the full year.

The RBI circular follows the Government decision to provide short-term production credit to farmers, up to Rs 3 lakhs, at 7 per cent interest. Public sector and regional rural banks would be provided two per cent interest subsidy on such credits.

"The amount of subsidy will be calculated on the amount of crop loan disbursed from the date of disbursement/drawal up to the date of payment or up to the date beyond which the outstanding loan becomes overdue i.e. March 31, 2007 for kharif and June 30, 2007 for rabi, respectively, whichever is earlier. The subsidy will be available to Public Sector Banks and Regional Rural Banks on the condition that they make available short-term credit at ground level at 7 per cent per annum. In case of RRBs, this will be applicable only to short term production credit disbursed out of their own funds and will exclude such credit supported by NABARD refinance," the circular said.

Banks would have to submit their quarterly claims within one a month after the completion of the respective quarter— June 30, 2006 September 30, 2006, December 31, 2006 and March 31, 2007.