With Prime Minister Narendra Modi’s recent move to compensate the debt-laden farmers, who have committed suicide in recent weeks after unseasonal storms damaged the winter crop, the Reserve Bank of India (RBI) on Thursday hinted a new scheme for interest subvention for farmers. The Central Bank is being worked out at its level though the scheme may take ‘some time’ from now to announce it for the farmers.
Modi had declared a 50 per cent increase of compensation and said that the banks have been asked to restructure loans of affected farmers and insurance companies have been asked to settle claims faster.
“As regards the scheme for the year 2015-16, the Government of India has advised that presently various alternative approaches for improving the efficacy of the scheme are being examined, the finalisation of which may take some time,” the RBI said through a notification, adding that the earlier interest subvention scheme will continue till June 30.
RBI further said it has been decided by government, ‘as an interim measure’, to implement the interest subvention scheme for 2015-16, till June 30, on the terms and conditions approved for the scheme for 2014-15. “All banks are, therefore, advised to take note and implement the interest subvention scheme for 2015-16 accordingly,” it said.
In 2014-15, interest subvention of 2 per cent was made available to banks on funds used for short-term crop loans up to Rs 3 lakh per farmer provided they make available short term credit at the ground level at 7 per cent. Also, additional interest subvention at the rate 3 per cent was made available to farmers repaying loans promptly.
RBI to offer differential interest rates on deposits
The Reserve Bank of Indai on Thursday allowed banks to offer differential interest rates on term deposits depending on whether they are with or without premature withdrawal facility. “Accordingly, banks will have the discretion to offer differential interest rates based on whether the term deposits are with or without-premature-withdrawal-facility,” the RBI said in a notification.
While all term deposits of individuals (held singly or jointly) of Rs15 lakh and below should ‘necessarily’ have premature withdrawal facility, RBI said for term deposits of more than Rs15 lakh, banks can offer deposits without the option of premature withdrawal. In the sixth bi-monthly Monetary Policy Statement of 2014-15 in February, RBI had decided to introduce early withdrawal facility in a term deposit as a distinguishing feature for offering differential rates of interest.
However, banks that offer such term deposits should ensure that at the customer interface point, the customers are given the option to choose between term deposits either with or without premature withdrawal facility, RBI said.