Title : Understanding Crop Loan Interest Rates and Subsidies.
- Loan installments and interest are to be paid together.
- The loan principal is divided into equal installments, and as repayments progress, the interest charges decreases
Crop loan interest rates:
Nationalized Bank:
- Rs. 3.00 lakhs at 7 percent per annum for the tenure of the crop loan.
District Central Bank:
- Bank to Society: 4 percent per annum for both small and large farmers.
- Society to member farmers: 6 percent per annum.
Interest rate subsidy:
- The Reserve Bank of India provides ani nterest rate subsidy of 2 percent per annum.
Short and Medium Term Loans: Understanding Interest Charges
a) Short-term loan, also known as a peak loan, and interest charges:
Interest is charged on this loan at a flat interest rate throughout the repayment period of the crop loan.
If the crop loan is not repaid within the specified period, interest is charged on both the principal and the accrued interest until maturity. This results in the application of "interest on interest" or compound interest after the term.
b) Medium-term loan and interest charges:
Medium-term loans are charged interest at a simple interest rate.
Loan installments and interest must be paid together.
The loan principal is divided into equal parts, and as we make repayments, the interest charges decrease.
Failure to pay the loan installment and interest on time will result in an interest charge on the interest itself, known as compound interest.
