Now, non-farmers cannot get Agricultural Gold Loans | Fusion - WeRIndia

Now, non-farmers cannot get Agricultural Gold Loans

Now, non-farmers cannot get Agricultural Gold Loans

So far, farmers and even non-farmers in the country are getting agricultural loans of up to ₹3 lakh by keeping gold as collateral from banks.

Since the interest rate is low, even people that are not pursuing farming are widely using this facility.

But, this will not be possible in future with the new directions of the central government. The government issued orders to banks asking them not to provide agricultural loans against gold mortgage from October 1, 2019.

Only farmers that have Kisan Credit Cards (KCC) will have this facility.

The Union Agriculture Ministry reportedly conveyed its decision to the banks in a video conference on July 31.

The Kerala Agriculture Minister V S Sunil Kumar shot off letters to RBI and the Union Agriculture Ministry to stop providing these cheaper loans to non-farmers.

After that, the central government asked some officials to check whether these agricultural loans are used by non-farmers in reality.

The banks also have been asked to send their recommendations in this context to the government and circulars to all their branches.

The interest is nine per cent on an agricultural loan against the gold mortgage, out of which five per cent is subsidy borne by both central and state governments, three per cent and two per cent respectively.

So, the loan is available for four per cent. Around 62 per cent, i.e. ₹50,169 crore was given against gold mortgage in the total agricultural loan amount of ₹80,803 crore in the last year.

KCC holders normally get loan up to ₹1 lakh without collateral. If the farmers need a loan higher than that, then they need to mortgage gold to get the loan.

Since agricultural loans fall under priority, banks have to meet certain targets to fulfill them. They prefer to provide agricultural loans against gold mortgage rather than providing a collateral free loan.

The central government’s decision will put a check to such practices of the banks as well.

Photo by Ben Barber, USAID on Pixnio (Free for commercial use)

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