Question: The Union Cabinet also gave its ex-post facto approval for interest waiver for the two months of November and December, 2016 for farmers accessing short term crop loans from Cooperative Banks due to …
(a) demoetisation.
(b) unfavorable monsoon.
(c) abundance of cash.
(d) None of the above.
Ans (a)
Related facts:
- On 24th January, 2017 The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its post-facto approval for the following decisions:
- National Bank for Agriculture & Rural Development (NABARD) will make short term borrowings at prevailing market rate of interest for approx. Rs.20,000 crore for on-lending to Cooperative Banks at 4.5% rate of interest.
- Additional capital of Rs.2,000 crore to be provided to NABARD for this purpose through the Union Budget. To start with, additional capital of Rs.500 crore may be released to NABARD during 2016-17 itself.
- Interest Subvention of about 1.8% and NABARD’s administrative cost of 0.2% to be provided as per the scheme of Department of Agriculture, Cooperation & Farmers Welfare. The extent of interest subvention may vary depending on the rate at which NABARD raises funds.
- NABARD will coordinate the conversion of operative/live KCCs into RuPay/ATM-enabled Kisan Credit Cards (KCCs) by Cooperative Banks and Regional Rural Banks (RRBs) in a mission mode.
- The Union Cabinet also gave its ex-post facto approval for interest waiver for the two months of November and December, 2016 for farmers accessing short term crop loans from Cooperative Banks.
Benefit - In the light of good monsoon and expectation of increased credit demand and in order to boost agricultural production, the farmers need to be supported through Cooperative Banks, which will enable them to scale up their agricultural operation.
- The approval will ensure increased availability of short term crop loans to farmers through Cooperative banks at reduced rate of interest.
- The conversion of operative/live KCCs into RuPay/ATM-enabled KCCs will enable easy and hassle free availability of credit and in keeping with the spirit of ‘Digital’ India, will facilitate digital and cashless transactions by farmers.
Background - The Government of India has, since 2006-07, been implementing the Interest Subvention Scheme under which short-term crop loans upto Rs.3 lakh are made available to the farmers at an interest rate of 7 percent per annum by the Public Sector. Banks, Regional Rural Banks and Cooperative. Banks. Farmers are provided with 3% interest subvention for short term crop loan upto Rs. 3 lakhs on prompt repayment of the loan. Thus, farmers have to effectively pay only 4% as interest for the said crop loan.
- Due to the demonetization farmers had to face difficulty in en-cashing the cheques received against sale proceeds of their Kharif produce in the mandis; and also the inadequacy of cash in carrying out Rabi operations and servicing the interest of the short term crop loans, an interest waiver is being provided for a period of 2 months i.e. November & December 2016 to farmers who were disbursed crop loan between 01.04.2016 and 30.09.2016.
- The provision of additional financial resource of Rs. 1060.50 crore is on account of (i) meeting the cost of interest waiver for 2 months ( November and December, 2016
(ii) Providing interest subvention and administrative cost to NABARD on short term borrowing of about Rs. 20,000 crore for on-lending to Cooperatives Banks in the current financial year.
Reference:
http://pib.nic.in/newsite/PrintRelease.aspx
http://www.business-standard.com/article/government-press-release/cabinet-approves-interest-waiver-for-the-two-months-of-november-and-117012400505_1.html