What changed
RBI directed all scheduled commercial banks to provide a 2 percentage point interest relief on crop loans up to ₹1 lakh for Kharif and Rabi 2005-06, as announced in the Union Budget 2006-07. Banks must credit the relief to borrowers' accounts before March 31, 2006, and can claim reimbursement from RBI in installments. Claims must be certified by statutory auditors and submitted by June 30, 2006.
What it means for you
Banks need to front-load the interest relief to farmers, impacting their cash flow until reimbursement from RBI, which is expected within one month of claim receipt. This requires meticulous calculation of relief on eligible loan amounts and maintaining branch-wise records for audit. Non-compliance or inaccuracies could lead to refund demands from RBI.
What you must do
- Credit the 2% interest relief to eligible farmers' accounts before March 31, 2006, for Kharif and Rabi 2005-06 crop loans up to ₹1 lakh.
- Calculate relief from disbursement date to payment date or until the loan becomes overdue (March 31, 2006 for Kharif, June 30, 2006 for Rabi), whichever is earlier.
- Submit claims to RBI using Annex I format, with option to file in installments, and ensure statutory auditor certification by June 30, 2006.
- Maintain branch-wise records as per Annex II and Annex III at Head Office for RBI inspection and audit.
Who it affects
All scheduled commercial banks disbursing crop loans for Kharif and Rabi 2005-06, Farmers availing crop loans up to ₹1 lakh, Bank branches handling agricultural loan accounts, Statutory auditors certifying claims
What is the deadline for crediting the interest relief to farmers?
The relief must be credited to the borrower's account before March 31, 2006.
How is the interest relief calculated for loans exceeding ₹1 lakh?
For crop loans exceeding ₹1 lakh, the 2% relief applies only on the principal amount up to ₹1 lakh.
What happens if RBI detects inaccuracies in claims after reimbursement?
Banks must immediately refund any excess amount received, as per the undertaking in the claim certificate.