Interest Subvention: KCC crop loans up to ₹3 lakh attract 7% interest. Government provides 2% subvention (reduces to 5%). Timely repayment gives additional 3% incentive - effective rate = 4% per annum.
KCC is a revolving credit facility for farmers at 7% standard interest. Government gives 2% subvention (5% effective). Farmers who repay on time get an additional 3% prompt repayment incentive, making the effective rate 4% for loans up to ₹3 lakh.
KCC limit = (Scale of Finance x Area) + 10% post-harvest expenses + 20% repair/maintenance + crop insurance premium. Limits are revised annually based on the crop plan submitted to the bank.
Crop loans use simple interest: Interest = Principal x Rate x Days / 36500. For a 6-month (180-day) loan of ₹1 lakh at 4%: Interest = 1,00,000 x 4 x 180 / 36500 = ₹1,973. Total repayment = ₹1,01,973.