Copy of Government order No CO  41  CLS 2006, Bangalore,  15.5.2006

I. SCHEME :

Financial assistance to Agricultural Co-operative Credit Institutions (PACSs/DCC Banks/PCARDBs/KSCARD Bank and KSC Apex Bank) to enable them to lend agricultural Loans (ST, MT & LT Loans) to the farmers at 4%.

II. OBJECTIVE :

The main objective of the scheme is to extend substantial relief to the farmers by reducing the heavy interest burden on agricultural loans provided by Co-operative Credit Institutions.

III. DEFINITIONS :
  1. Primary Agriculture Credit Society (PACS) means Primary Agriculture Credit Co-operative Society by whatever name called namely Vyvasaya Seva Sahakari Sangha Niyamita, Vyvasaya Seva Sahakari Bank Niyamita, Prathamika Krushi Pathina Sahakara Sangha Niyamita, Prathamika Krushi Pathina Sahakara Bank Niyamita, Farmers Service Co-operative Society Niyamita, Raitha Seva Sahakara Sangha Niyamita etc.  The PACS may be ceded to the DCC Bank or the Commercial Bank as the case may be.
  2. District Co-operative Central Bank (DCC Bank) means District Cooperative Central Bank situated at District Headquarters providing Short and Medium Term Loans to the PACS.
  3. The Primary Co-operative Agricultural and Rural Development Bank (PCARD Bank) means the Primary Co-operative Agricultural and Rural Development Bank normally situated at Taluk Headquarters providing agricultural loans to the farmers for various purposes.
  4. Karnataka State Co-operative Agriculture and Rural Development Bank (KASCARD Bank) means Karnataka State Co-operative Agriculture and Rural Development Bank situated at Bangalore providing long term agricultural loans to the farmers through PCARD Banks.
  5. Karnataka State Cooperative Apex Bank (Apex Bank) means Karnataka State Cooperative Apex Bank Ltd., situated at Bangalore providing Short Term and Medium Term loans to the farmers through DCC Banks for various purposes.
IV. Beneficiaries : 

The Scheme would benefit around 12.00 lakh farmers availing short term, medium term and long term loans for various agricultural Operations from Cooperative Credit Institutions.

V. Application of the Scheme :  

As per the scheme, agricultural loans i.e ST.MT loans advanced by PACSs/DCC Banks and PCARDBs and long term loans advanced by the PCARD Banks w.e.f 1.4.2006 are covered.

This Scheme is not applicable to non-farm sector loans.  This is also not applicable to loans given to the farmers earlier to 1.4.2006.

VI. Present status of lending rates : 

Prior to 1.4.2004, agricultural loans were being provided by the Primary Lending institutions to the farmers at varying rates that are around 12.5% in respect of Short term/Medium Term Loans and 13.5% in respect of LT loans.  With effect from 1.4.2004 agricultural loans are being provided at 6% to the farmers and the Government is reimbursing interest subsidy at 5.5% on the loans advanced to the farmers at the primary level.  In order to provide these agricultural loans at 4% the Government has to meet the differential cost in the form of subsidy to be sanctioned to the PACSs/DCC Banks/PCARD Banks.

VII. Funding by the Government :

The novelty of the scheme is reduction in the rate of interest on agricultural loans to 4% and making a firm commitment by the Government to provide interest subsidy at 7.5% on the loans sanctioned by the cooperative credit institutions and to provide adequate provision in the budget for reimbursing the said interest subsidy to the cooperative credit institutions.  The interest subsidy payable as per the scheme is limited to the period which is normally allowed for repayment of loans.  The liability of Government under this scheme starts from the date of sanction/release of loan to the farmers and extends upto the due date of repayment during the loan period.  However if the farmer fails to repay the amount on the due date and becomes a defaulter, he shall be liable to repay the loan with normal rate of interest and other charges if any to the concerned agricultural credit cooperative society/ bank from the date of sanction of loans.

There is a gestation period of around two years for repayment of principal in respect of long term loans during which the farmer is required to pay only the interest.  The benefit of the scheme is available during the gestation period also.

VIII. Benefit

The benefit under this scheme is available to agricultural loans upto a limit of Rs.3.00 lakhs per person and if any farmer avails a loan in excess of Rs.3.00 lakhs from the agricultural credit cooperative society/bank, he shall be liable to repay the said loan with normal rate of interest and other charges if any.

IX. Mode of release :
  1. The Government will immediately sanction the entire amount of Rs.76.50 crores earmarked for the purpose in the budget for 2006-07 and deposit the amount with the Karnataka State Cooperative Apex Bank in advance in the name of the Registrar of CS.
  2. The Registrar shall release subsidy @ 7.5% to the DCCBs on the quantum of ST/MT loans advanced to the farmers by PACSs and PCARDBs every quarter based on the claims submitted by DCCBs and certified by the Deputy Director of Cooperative Audit.
  3. The Registrar shall release subsidy @ 7.5% to KSCARD Bank on the quantum of loans sanctioned to the farmers by PCARDBs every quarter based on the actual claims submitted by KSCARDB and duly certified by Deputy Director of Cooperative Audit.
  4. The claims shall be prepared quarterly by the DCCBs in respect of PACS including the advances made out of the own funds of PACS and KSCARD Bank in respect of PCARDBs including the advances made by PCARDBs out of their own funds.  These claims shall be verified and certified by the respective Deputy Directors of Cooperative Audit and submitted to the Registrar within 15th of the month following the close of the quarter.  The RCS shall after due verification, release the subsidy to the DCCBs/KSCARDB by the 25th of the month by drawing on the amount with KSC Apex Bank.