A Reserve Bank of India (RBI) panel has recommended doing away with interest subvention schemes and ploughing back subsidy amount into a universal crop insurance scheme for small and marginal farmers. Interest subvention is a politically sensitive issue but it has played havoc with the repayment patterns of the agriculture loans. The committee headed by RBI executive director Deepak Mohanty has put out a discussion paper to improve the last-mile credit delivery and financial inclusion for farmers. The committee has recommended that a mandatory universal crop insurance scheme covering all crops to be introduced starting with small and marginal farmers at affordable rates. The insurance should be mandatory for all agricultural loans with the farmer paying a nominal premium and the balance coming from government subsidy. A graded crop insurance could be made available to medium and large cultivators with higher monetary ceiling and lower government subsidy. If crop insurance is to be successful, it has to be made available and affordable to all farmers with a substantial government subsidy, which could also be commercially viable for insurance companies. Some calculations suggests that the overall premium will fall to less than 3% from the current rates of 8-11% if the area covered increases to say 100 million hectares. The committee also mooted the introduction of the 'Gold KCC' (Kisan Credit Card) with higher flexibility, the committee recommended should be introduced for borrowers with prompt repayment records. The government-sponsored personal insurance may be dovetailed with the KCC scheme. The committee has recommended that KCC should continue to have a built-in consumption credit component, recognising that while agricultural income could be lumpy, expenditure is an on-going process that results in negative cash flow for several months. Considering the still significant exclusion of women, the committee recommended that banks should make special efforts to step up account opening for women. Given the government's emphasis on the welfare of the girl child, it suggested that the government can consider a welfare scheme—Sukanya Shiksha —that can be jointly funded by the central and state governments. Source - http://www.dnaindia.com