Kisan credit card without interest will get Loan 1 lakh
Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date with consideration, generally with interest. Credit also refers to an accounting entry that either decreases assets or increases liabilities and equity on the company’s balance sheet. Additionally, on the company’s income statement, a debit reduces net income, while a credit increases net income.
BREAKING DOWN ‘Credit’
Credit also refers to the creditworthiness or credit history of an individual or company. For example, someone may say, “He has great credit, so he’s not worried about the bank rejecting his mortgage application.” In other cases, credit refers to a deduction in the amount one owes. For example, imagine someone owes his credit card company $1,000, but he returns a purchase worth $300 to the store. He receives a credit on his account and then owes only $700.
New Delhi: Farmers in the country have a reason to smile, as another booster package from the Narendra Modi government is in the works, which aims to provide interest-free loan up to Rs 1 lakh to small and marginal farmers covered under the Kisan credit card (KCC) scheme.
To be launched ahead of the interim budget presentation on February 1, the new scheme would be yet another attempt by the Centre to win over the rural voters who seem to have distanced themselves from the ruling dispensation in the recently concluded assembly elections. The package would cost the exchequer about Rs 30,000 crore a year.
The government has already indicated plans to launch a universal basic income scheme for farmers that would have a fixed cash component. The Interest Subvention Scheme (ISS) for short-term crop loans would be a bonanza for farmers, as it would help augment their income by allowing flow of institutional credit supporting higher production.
Sources in the agriculture ministry said that a new ISS scheme is being finalised with urgency, as the government wants disbursals to start immediately, from next month onwards. This would help farmers plan early for sowing in the new Kharif season.
Under the revised ISS, interest-free crop loans ranging from Rs 50,000 to Rs 1 lakh will be provided to small and marginal farmers having a land holding of less than 5 acres. Farmers with larger holdings would be covered under the existing ISS scheme. Banks would not ask for collateral for extending short-duration loan under this.
The operational ISS scheme provides farmers with short-term crop loans up to Rs 3 lakh at a subvented interest rate of 7 per cent for up to one year. In case of prompt repayment, the farmers can avail of a prompt repayment incentive of 3 per cent per annum and thus the effective rate of interest on such loans is only 4 per cent. The new scheme will subsidise even this 4 per cent interest burden offering virtually free credit to farmers.
The running ISS also provides for post-harvest loans for up to six months at the same rate of interest as short-term crop loans to Kisan credit card holding small and marginal farmers, to discourage them from distress sale and instead store their produce in warehouses.
“This is good move that will help increase institutional credit flow and bring more and more farmers, including small and marginal farmers, within the institutional credit fold. It is also better than a loan waiver scheme that hurt banks, which then stop extending loans to farmers,” said an agriculture sector expert, asking not to be named.
The government had set an agricultural loan disbursal target of Rs 10 lakh crore in 2017-18. Out of this 70-75 per cent has been earmarked for disbursals under crop loans.
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Modi, who is seeking a second term, has to win over discontented farmers before the elections. They have been hit by falling crop prices and rising input costs, prompting thousands of them to protest in the street, seeking debt waivers.