Release of interest relief on crop loans for Kharif-Rabi 2005-06

New Delhi, Mar 30 (UNI) The Union Cabinet today approved the release of Rs 1,700 crore to provide interest relief of two percentage points on the principal amount upto Rs 1 lakh each on crop loans availed by farmers for Kharif and Rabi 2005-06.

The borrowers, who have availed crop loans upto Rs 1 lakh each for Kharif and Rabi 2005-06, would be instantly benefited.

In pursuance to the Budget announcement, which envisaged grant of interest relief of two percentage points in the interest rate on the principal amount of upto Rs 1 lakh each on crop loans, the Reserve Bank of India had issued a circular to the Commercial Banks on March 9, 2006. Similarly, NABARD had also issued a circular to the Cooperative Banks and Regional Rural Banks (RRBs).

The amount of the relief is required to be credited to the borrower's account before March 31, 2006.

The circular regarding interest relief said ''It has been decided that banks may first credit the proposed relief to the farmer's account before March 31, 2006 and thereafter seek reinbursement.'' The banks will work out the interest relief on the basis of all crop loans for Kharif and Rabi disbursed to farmers during the financial year 2005-06. However, if each crop loan exceeds Rs 1 lakh, the interest relief would be applicable on its principal amount.

Interest relief would be calculated at two percentage points, on the amount of the crop loan disbursed from the date of withdrawal upto the date of payment or the date beyond which the loan becomes overdue as March 31, 2006 for Kharif and June 30, 2006 for Rabi respectively.

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