RAS question
Which institution provides crop loans at 7% interest rate with 3% subvention?
Correct answer: (A) Commercial banks and cooperative banks.
Commercial banks and cooperative banks are formal lending institutions that provide short-term crop loans to farmers at the concessional 7% rate under the interest-subvention scheme.
Explanation
The scheme is implemented through the banking system, not through a regulator or an informal lender. The PIB release says the Government of India provides short-term crop loans up to ₹3 lakh to farmers at a concessional interest rate of 7% per annum. It names the lending institutions as public sector banks, eligible private-sector commercial bank branches, regional rural banks and cooperative banks using their own resources. That is why the option combining commercial banks and cooperative banks is the best answer. This rate structure belongs to the formal-credit framework: the subsidised crop loan is routed through banks, and timely repayment brings the farmer an additional 3% prompt-repayment incentive, reducing the effective rate to 4%.
Why the other options are wrong
- (B) RBI is not the direct crop-loan lender to farmers; the PIB release refers to it in the settlement of interest-subvention claims, not as the institution advancing the loans.
- (C) NABARD is linked with reporting and settlement/refinance-type functions, while the PIB release lists banks and cooperative banks as the lending institutions using their own resources.
- (D) Money lenders are outside the formal subsidised crop-credit channel described by the PIB release, which operates through public sector banks, private commercial banks, regional rural banks and cooperative banks.
Concept
This tests agricultural credit and interest-subvention schemes in Indian Economy. It recurs in RAS because candidates must separate the lender, the regulator and the refinance or settlement institution.