Various Government Schemes – CS Professional Study Material

Chapter 10 Various Government Schemes – CS Professional Banking Law and Practice Notes is designed strictly as per the latest syllabus and exam pattern.

Various Government Schemes – CS Professional Banking Law and Practice Study Material

Question 1.
Which scheme provides refinance support to banks for lending to micro units having loan requirement upto ₹ 10 lakh and explain its type of funding support under the scheme? (Dec 2020, 6 marks)
Answer:
MUDRA provides refinance support to Banks/Micro Finance Institutions (MFIs) for lending to Mircro Units having loans requirement upto ₹ 10 lakh.

Type of funding support from MUDRA:
1. Micro Credit Scheme: It is offered mainly through MFIs, which deliver the credit upto lakh, for various micro enterprise activities. Although, the mode of delivery may be through groups like SHGs/JLGs, the loans are given to the individuals for specific income generating micro enterprise activity. The MFIs who are availing financial support, need to enrol with MUDRA by complying to some of the requirements as notified by MUDA, from time to time.

2. Refinance Scheme for Banks: Different banks like Commercial Banks, Regional Rural Banks and Scheduled Cooperative Banks are eligible to avail of refinance support from MUDRA for financing micro enterprise activities. The Refinance is available for term loan and working capital loans, upto an amount of t 10 lakh per unit.

The eligible banks, who have enrolled with MUDRA by complying to the requirements as notified, can avail refinance from MUDRA for the loan issued under Shishu (up to ₹ 50,000), Kishore (above ₹ 50,000 up to ₹ 5 lakh) and Tarun (above ₹ 5 lakh to ₹ 10 lakh) Categories.

3. Women Enterprise Programme: To encourage women entrepreneurs, the financing. banks/MFIs may consider extending additional facilities, including interest reduction on their loan. At present, MUDRA extends a reduction of 25 bps in its interest rates to MFIS/NBFCs, who are providing loans to women entrepreneurs.

4. Securitization of Loan Portfolio: MUDRA also supports
Banks/NBFCs/MFIs for raising funds for financing micro enterprises by participating in securitization of their loan assets against micro enterprise portfolio, by providing second loss default guarantee, for credit enhancement and participating in investment of Pass Through Certificate (PTCs) either as Senior or Junior investor.

Question 2.
Explain the following statement in brief on the point of reasoning :
Banks are entered insurance sector in a Big Way. (Dec 2021, 1 mark)
Answer:

• It is a move towards Universal Banking.
• Since insignificant level of population is covered, huge potential exists for insurance business. Brand Equity/Network/Workforce can be optimally utilized for higher profits.
  ‘It facilitates service under one roof to their customer.
  ‘It increases earnings of the Bank.

Question 3.
(i) What is MUDRA and why MUDRA has been set up? (Dec 2021) (3 marks)
(ii) What are the roles, responsibilities and offerings of MUDRA? How MUDRA function? (3 marks)
Answer:
(i) MUDRA, Micro Units Development & Refinance Agency Ltd., is a financial institution set up by Government of India for development and refinancing of micro units’ enterprises. It was announced by the Hon’ble Finance Minister while presenting the Union Budget for Financial Year 2016. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various Last Mile Financial Institutions like Banks, NBFCs and MFIs.

Biggest bottleneck in the growth of entrepreneurship in the Non-Corporate Small Business Sector (NCSBS) is lack of financial support to this sector. More than 90% of this sector does not have access to formal sources of finance. Government of India is setting up MUDRA Bank through a statutory enactment for catering to the needs of the NCSBS segment or the informal sector for bringing them in the mainstream.

(ii) MUDRA is responsible for refinancing ail Last Mile Financiers such as Non- Banking Finance Companies, Micro Finance Institutions, Societies, Trusts, Section 8 Companies (formerly Section 25), Small Finance Banks and Regional Rural Banks which are in the business of lending to micro/small business entities engaged in manufacturing, trading and services activities as well as Agriculture, Allied activities. MUDRA would also partner with State/Regional level financial intermediaries to provide finance to Last Mile Financier of small / micro business enterprises.

Under the aegis of Pradhan Mantri MUDRA Yojana (PMMY), MUDRA has already created its initial products / schemes. The interventions have been named ‘Shishu’, ‘Kishor’and Tarun’to signify the stage of growth/development and funding needs of the beneficiary micro unit/ entrepreneur and also to provide a reference point for the next phase of graduation/growth to look forward to. The financial limit for these schemes is:
(a) Shishu: Covering loans upto ₹ 50,000.
(b) Kishor: Covering loans above ₹ 50,000 and up to ₹ 5 lakhs.
(c) Tarun: Covering loans above ₹ 5 lakhs and ₹ 10 lakhs.

As per budget 2019-20 provision has been made for loan up to ₹ 1 lakh to one woman per SHG.

MUDRA’s delivery channel is conceived to be through the route of refinance primarily to Banks / NBPCs / MFIs.

Also, there is a need to develop and expand the delivery channel at the ground level. In this context, there is already in existence, a large number of ‘Last Mile Financiers’ in the form of companies, trusts, societies, associations and other networks which are providing informal finance to small businesses.

Question 4.
Ms. Rashmi, after completed Bachelor’s Degree in Dental Surgery, want to open a Dental Clinic. For establishing dental clinic, she needs some funds for purchasing of necessary equipment and furniture and other establishment. The estimated amount may be around ₹ 7 lakh for Dental Clinic. She somewhere heard about the MUDRA, but do not know much about it. She approached the Bank branch to avail the credit facility. How the Bank branch will consider the proposal of Ms. Rashmi and under which scheme she can be financed and what are the benefits of the Scheme. (Aug 2021, 6 marks)
Answer:
The bank branch can provide credit facilities to Rashmi, as under:
(i) Refinance Scheme for Banks/ NBFCs : Under this scheme the refinance is available for term loan and working capital loan up to an amount of ₹ 10 lakh per unit. The Banks and Financial institutes provide credit facilities to the applicants under the categories (i) Shishu : covering loans upto ₹ 50,000/-, (ii) Kishor : covering loans above ₹ 50,000/- and upto lakh, and (iii) Tarun : covering loans above lakh and upto 10 lakh.

In order to encourage women entrepreneurs, the financing banks / Micro Finance Institutes may consider extending additional facilities, including interest reduction on their loan. Since the estimated amount is around ₹ 7 lacs for dental clinic of Ms. Rashmi, banks can finance under “Tarun” scheme.

(ii) MUDRA Card : Banks can also provide a MUDRA card to Ms. Rashmi for working capital finance. MUDRA Card is a debit card issued against the MUDRA loan account for working capital portion of the loan. The borrower can make use of MUDRA Card in multiple withdrawal and credit, to manage the working capital limit in a most efficient manner and keep the interest burden minimum.

Benefits of MUDRA Schemes:
(a) No collateral required : The Pradhan Mantri MUDRA Yojana loan is an unsecured type of business loan that means the loan borrower does not require to pledge their valuable assets as collateral to the lender. Under this scheme the government is the credit guarantee for the borrower.

(b) Rate of interest are affordable: Applicants can avail business loans for small amounts at nominal interest rates from eligible Banks / Financial institutes.

(c) Lower interest rates for women applicants : In order to encourage women entrepreneurs, the lending Institutes provide reduction in interest rates to women applicants.

(d) Multipurpose use : Credit facility sanctioned under MUDRA scheme can be utilised for fund or non-fund based needs of the business.

Question 5.
Explain MUDRA Yojana in detail.
Answer:
PRADHAN MANTRI MUDRA YOJANA (PMMY)
Micro Units Development and Refinance’Agency Ltd. [MUDRA] is an NBFC supporting development of micro enterprise sector in the country. MUDRA is a public sector institution for providing loans to small entrepreneurs launched on 08/04/2015. MUDRA provides refinance support to Banks / MFIs for lending to micro units having loan requirement up to ₹ 10 lakh. MUDRA provides refinance to micro business under the Scheme of Pradhan Mantri MUDRA Yojana.

Purpose of MUDRA Loan
Mudra loan is extended for a variety of purposes which provide income generation and employment creation. The loans are extended mainly for:

1. Business loan for Vendors, Traders, Shopkeepers and other Service Sector activities
2. Working capital loan through MUDRA Cards
3. Equipment Finance for Micro Units
4. Transport Vehicle loans

MUDRA Scheme
MUDRA has launched following three loan instruments, as given below:

1. Shishu (the starters) upto ₹ 50,000
2. Kishor (the mid stage finance seekers) above ₹ 50,000 upto ₹ 5 lakh
3. Tarun (growth seekers) Above ₹ 5 lakh up to ₹ 10 lakh.

Types of funding support from MUDRA

1. Micro Credit Scheme (MCS) for loans up to ₹ 1 lakh finance through MFIs.
2. Refinance Scheme for Commercial Banks / Regional Rural Banks (RRBs) / Scheduled Co-operative Banks
3. Women Enterprise programme
4. Securitization of loan portfolio

1. Micro Credit Scheme: It is offered mainly through Micro Finance Institutions (MFIs), which deliver the credit upto ₹ 1 lakh, for various micro enterprise activities. Although, the mode of delivery may be through groups like SHGs/JLGs, the loans are given to the individuals for specific income generating micro enterprise activity. The MFIs for availing financial support need to enroll with MUDRA by complying to some of the requirements as notified by MUDRA, from time to time.

2. Refinance scheme for Banks: Different banks like Commercial Banks, Regional Rural Banks and Scheduled Cooperative Banks are eligible to avail of refinance support from MUDRA for financing micro enterprise activities. The refinance is available for term loan and working capital loans, up to an amount of ₹ 10 lakh per unit. The eligible banks, who have enrolled with MUDRA by complying to the requirements as notified, can avail of refinance from MUDRA for the loan issued under Shishu, Kishor and Tarun categories.

3. Women Enterprise programme: To encourage women entrepreneurs, the financing banks / MFIs may consider extending additional facilities, including interest reduction on their loan. At present, MUDRA extends a reduction of 25bps in its interest rates to MFIs / NBFCs, who are providing loans to women entrepreneurs.

4. Securitization of loan portfolio: MUDRA also supports Banks / NBFCs / MFIs for raising funds for financing micro enterprises by participating in securitization of their loan assets against micro enterprise portfolio, by providing second loss default guarantee, for credit enhancement and participating in investment of Pass Through Certificate (PTCs) either as Senior or Junior investor

Question 6.
What do you understand by MUDRA Card?
Answer:
MUDRA Card
MUDRA Card is an innovative product which provides working capital facility as a cash credit arrangement. MUDRA Card is a debit card issued against the MUDRA loan account, for working capital portion of the loan. The borrower can make use of MUDRA Card in multiple withdrawal and credit, to manage the working capital limit in a most efficient manner and keep the interest burden minimum.

MUDRA Card will also help in digitalization of MUDRA transactions and creating credit history for the borrower. National Payment Corporation of India (NPCI) has given RuPay branding to MUDRA Card and separate BIN / IIN for the same, by which credit history can be tracked. MUDRA Card can be operated across the country for withdrawal of cash from any ATM / micro ATM and make payment through any ‘Point of Sale’ machines.

The design of the MUDRA card as approved by DFS, Gol and NPCI is given below. Banks can customize the same by incorporating their logo and name.

Question 7.
Explain features of National Equity Fund.
Answer:
National Equity Fund Objective
The objective of the Scheme is to provide equity type support to Micro and Small Enterprises (MSE) as defined under MSME Act 2008. The fund is administered by SIDBI in participation with Government of India.

Eligibility

1. New as well as existing entrepreneurs in the MSE sector.
2. Sanction of refnance in respect of term loan for the projects by SIDBI is a prerequisite.
3. The complete requirements of the projects in the form of equity assistance, the term loan and working capital will be provided by one agency viz. a nationalized bank or State Finance Corporation.

Features

1. Lending institutions to provide equity type of soft loan scheme under this scheme.
2. Project cost can be upto ₹ 50 lakh (including margin for working capital) for MSE sector.
3. Amount of Assistance – 25% of the project cost subject to a maximum X 10 lakh.
4. Debt Equity ratio -1.875 :1 (excluding state subsidy for working capital).
5. Minimum promoters’ contribution should be 10% of the project cost.
6. Repayment period – 7 years including moratorium up to 3 years.
7. Security – No security or collateral nor coverage under DICGC guarantee scheme is needed, as the credit risk is borne by SIDBI.

Question 8.
What do you understand by Sukanya Samriddhi Account Yojana?
Answer:
Objective
Sukanya Samriddhi Account is Government of India backed savings scheme targeted at the parents of girl child. It is a Girl Child Prosperity Account. The Sukanya Samriddhi Yojana was launched as a part of the Beti Bachao, Beti Padhao campaign by the Modi government on 22 January 2015 after seeking the subjugating conditions of the girl children in the country. The scheme encourages parents to build a fund for the future education and marriage.

Features of the scheme:
1. Who will open this account: A Sukanya Samriddhi Account can only be opened by the parent/legal guardian for a maximum of two female children. An exemption is provided by presenting a medical certificate from an authorized medical institution for twins and triplets.

2. Age Criteria: A Sukanya Samriddhi account can only be opened for a girl child anywhere between her birth and 10 years of age.

3. Residential status: This account can only be opened for a girl child who is a resident of India. This scheme is unavailable for a girl child having non-resident status. Even if the parents or the legal guardians are non-residents, then also this scheme will not be available to them. If the girl child becomes a non resident after opening this account, then this change should be intimated to the concerned post office/ bank within 1 month of such change after which the account gets closed.

4. Account in the name of the girl child: Sukanya Samriddhi account must always be opened in the name of a girl child and not in the name of her parents or legal guardians. They will only deposit an amount in the account on behalf of the minor girl child.

5. Number of accounts: A single parent/legal guardian can open only one account for every girl child in the family. A maximum of two accounts for two girl children can be opened in one family.

6. Where to open this account: This account is opened in the authorized branches of Post Offices or commercial banks like State Bank of India, Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, Andhra Bank, UCO Bank, and Allahabad Bank, to name a few.

7. Documents required: There are certain documents required to open this account

• Birth certificate of the girl child
• Address and identity proof of the depositor (parents or the legal guardians)- Aadhaar card, PAN card, passport, ration card, driving license.
• In case of twins or triplets, a medical certificate proving the order of birth of children.
• Certificate stating the nature of a relationship with the girl child. In cases where this account is opened by the biological parents of the girl child, the birth certificate will serve the requirement of this certificate. But in the case of the adopted girl child, this certificate becomes necessary.

8. Threshold of deposits: Sukanya Samriddhi account can be opened with a minimum deposit of ₹ 250 per account. A maximum limit on the amount of deposit to this account has been set at ₹ 1.50 lakhs per account. There is no limit in the number of deposits in a month or a fiscal year.

9. Mode of payment of deposits: The cheque or the demand draft should be in the name of the

• For Banks/Financial institutions- Concerned Bank Manager
• For Post Office- Concerned Postmaster

The parent or the guardian is required to write the girl child’s name and the account number on the back of the cheque or draft while making the payment of deposit.

10. Account Transferability: The option to transfer the Sukanya Samriddhi Account from the post office to post office, bank to bank, post office to the bank, and bank to post office on furnishing certain documents.

11. Penalty: A penalty of ? 50 will be imposed if there is a failure in meeting the minimum deposit requirements.

12. Rate of Interest: The scheme is currently offering a rate of interest of 8.1% for 2018-19. This interest is compounded on yearly basis.

13. Maximum duration of deposit: The maximum duration for which a parent/guardian is required to deposit an amount in this account is 14 years. After the end of this duration, no more money is required to be deposited to this account and it will continue to accumulate interest until it matures/closed.

14. Closure of Account: This account gets closed after it attains maturity after completing the tenure of 21 years. The money lying in this account including the interest is paid to girl child after attaining 18 years of age and on submission of an account closure application along with address and identity proof, proof of residence and citizenship.

15. Taxation aspects: The total maturity amount and the interest earned on this account is fully exempted from taxation under section 80C of Income Tax Act 1961 and follows Exempt-Exempt-Exempt (EEE) tax regime. As of now, an amount up to ₹ 1.5 lakh is exempted.

16. Tenure of account: This savings account remains active for a maximum period of 21 years from the date of opening of this account, after which the account stops to accrue any interest.

Question 9.
Explain Pradhan Mantri Jeevan Jyoti Bima Yojana in detail.
Answer:
PRADHAN MANTRI JEEVAN JYOTI BIMA YOJANA (PMJJBY)
Scope: All individual account holders of participating banks in the age group of 18 to 50 years will be entitled to join. In case of multiple bank accounts held by an individual in one or different banks, the person would be eligible to join the scheme through one bank account only. Aadhar would be the primary KYC for the bank account.

Enrolment period: The cover period is from 1st June to 31st May, subscribers are required to enroll and give their auto-debit consent by 31^st May every year. Those joining subsequently would be able to do so with payment of full annual premium for prospective cover.

Individuals is free to exit the scheme at any point and may re-join the scheme in future. The exclusion of insurance benefits during the lien period shall also apply to subscribers who exit the scheme during or after the first year and rejoin on any date on or after 1^st June 2016.

Benefits: ₹ 2 lakh is payable on member’s death due to any cause.
Premium: ₹ 330/- per annum per member. The premium will be deducted from the account holder’s bank account through ‘auto debit’ facility in one instalment, as per the option given, on or before 31^st May of each annual coverage period under the scheme. Delayed enrolment for prospective cover after 31^st May will be possible with full payment of annual premium.

Eligibility Conditions:
Individual bank account holders of the participating banks aged between 18 years (completed) and 50 years (age nearer birthday) who give their consent to join / enable auto-debit, as per the above modality, will be enrolled into the scheme.

Termination of assurance: The assurance on the life of the member shall terminate on any of the following events and no benefit will become payable there under:

1. On attaining age 55 years subject to annual renewal up to that date (entry, however, will not be possible beyond the age of 50 years).
2. Closure of account with the Bank or insufficiency of balance to keep the insurance in force.
3. In case a member is covered under PMJJBY with LIC of India / other company through more than one account and premium is received by LIC / other company inadvertently, insurance cover will be restricted to ₹ 2 Lakh and the premium paid for duplicate insurance(s) shall be liable to be forfeited.
4.  If the insurance cover is ceased due to any technical reasons such as insufficient balance on due date or due to any administrative issues, the same can be reinstated on receipt of full annual premium, subject however to the cover being treated as fresh and the 45 days lien clause being applicable.
5. Participating Banks shall remit the premium to insurance companies in case of regular enrolment on or before 30^th of June every year and in other cases in the same month when received.

Question 10.
Explain benefits and eligibility of Atal Pension Yojana.
Answer:
ATAL PENSION YOJANA (APY)
Background
The scheme is for Indian citizen workers in unorganized sector. It was launched in 2015. The scheme is administered by the Pension Fund Regulatory and Development Authority (PFRDA) under the National Pension Scheme (NPS). Subscribers would receive a fixed minimum of ₹ 1000 or ₹ 2,000 or ₹ 3,000 or ₹ 5,000 per month at the age of 60 years depending on their contribution.

Benefit: Fixed pension for the subscribers between ₹ 1,000 to ₹ 5,000, if he joins and contributes between the age of 18 years and 40 years.

Eligibility:
Atal Pension Yojana (APY) is open to all bank account holders. The Central Government would also co-contribute 50% of the total contribution or ₹ 1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years.

The Government co-contribution is payable to eligible PRANs by PFRDA after receiving the confirmation from Central Record Keeping Agency at such periodicity as may be decided by PFRDA.

Enrolment and Subscriber Payment
All bank account holders under the eligible category may join APY with auto debit facility to accounts, leading to reduction in contribution collection charges. The subscribers should keep the required balance in their savings bank accounts on the stipulated due dates to avoid any late payment penalty.

Operational Framework
It is Government of India Scheme, which is administered by the Pension Fund Regulatory and Development Authority. The Institutional Architecture of NPS would be utilised to enroll subscribers under APY. The offer document of APY including the account opening form would be formulated by PFRDA.

Funding of APY Government would provide

1. fixed pension guarantee for the subscribers;
2. would co-contribute 50% of the total contribution or ₹ 1000 per annum, whichever is lower, to eligible subscribers; and
3. would also reimburse the promotional and development activities including incentive to the contribution collection agencies to encourage people to join the APY.

Penalty for default
Under APY, the individual subscribers shall have an option to make the contribution monthly. Banks are required to collect additional amount for delayed payments, such amount will vary from minimum ₹ 1 per month to ₹ 10/- per month as shown below:

• ₹ 1 per month for contribution up to ₹ 100 per month.
• ₹ 2 per month for contribution up to ₹ 101 to ₹ 500 per month.
• ₹ 5 per month for contribution between ₹ 501 to ₹ 1000 per month.
• ₹ 10 per month for contribution beyond ₹ 1,001 per month.

The fixed amount of interest/penalty will remain as part of the pension corpus of the subscriber. Discontinuation of payments of contribution amount shall lead to following:

• After 6 months account will be frozen.
• After 12 months account will be deactivated.
• After 24 months account will be closed.

Exit and pension payment
Upon completion of 60 years, the subscribers will submit the request to the associated bank for drawing the guaranteed monthly pension.

Exit before 60 years of age is not permitted, however, it is permitted only in exceptional circumstances, i.e., in the event of the death of beneficiary or terminal disease.

Question 11.
Explain benefits and eligibility of Pradhan Mantri Vaya Vandana Yojana.
Answer:
PRADHAN MANTRI VAYA VANDANA YOJANA (PMWY)
Introduction
PMWY is a pension scheme announced by Government of India, exclusively for the senior citizens aged 60 years and above which is available from 4^th May 2017 to 31^st March 2020. Offline/ Online purchase can be through LIC of India.

The Union Cabinet chaired by Prime Minister Narendra Modi implemented some major changes under Pradhan Mantri Vaya Vandanan Yojana (PMWY). They are as follows:

1. The investment limit has been increased to 15 lakhs under the Pradhan Mantri Vaya Vandana Yojana (PMVVY). The earlier limit was 7.5 lakhs.
2. The last date to apply for Pradhan Mantri Vaya Vandana Yojana (PMVVY) has been extended to 31^st March 2020. It was earlier supposed to end on 4^th May 2018
3. The limit on maximum investment has now revised to per senior citizen (and not per family). So now in a family if both husband and wife are senior citizen. Both can invest 15 lakhs each as purchase price (total 30 lakhs) and can enjoy bonus facility.

Benefits:

1. Pension Payment: On survival of the Pensioner during the policy term of 10 years, pension in arrears (at the end of each period as per mode chosen) shall be payable.
2. Death Benefit: On death of the Pensioner during the policy term of 10 years, the Purchase Price shall be refunded to the beneficiary.
3. Maturity Benefit: On survival of the pensioner to the end of the policy term of 10 years, Purchase price along with final pension installment shall be payable.

Payment of Purchase Price:
The scheme can be purchased by payment of a lump sum Purchase Price. The pensioner has an option to choose either the amount of pension or the Purchase Price. The minimum and maximum Purchase Price under different modes of pension will be as under:

Mode of Pension	Minimum Purchase Price	Maximum Purchase Price
Yearly	₹ 1,44,578 ‘	₹ 14,45,783
Half-yearly	₹ 1,47,601	₹ 14,76,015
Quarterly	₹ 1,49,068	₹ 14,90,683
Monthly	₹ 1,50,000	₹ 15,00,000

The Purchase Price to be charged shall be rounded to nearest rupee.

Mode of pension payment:
The modes of pension payment are monthly, quarterly, half-yearly & yearly.

The pension payment shall be through NEFT or Aadhaar Enabled Payment System. The first instalment of pension shall be paid after 1 year, 6 months, 3 months or 1 month from the date of purchase of the same depending on the mode of pension payment i.e. yearly, half-yearly, quarterly or monthly respectively.

Sample Pension rates per ₹ 1000 Purchase Price:
The pension rates for ₹ 1000 Purchase Price for different modes of pension payments are as below:
Yearly: ₹ 83.00 p.a.
Half-yearly: ₹ 81.30 p.a.
Quarterly: ₹ 80.50 p.a.
Monthly: ₹ 80.00 p.a.
The pension instalment shall be rounded off to the nearest rupee. These rates are age independent.

Surrender Value:
The scheme allows premature exit during the policy term under exceptional circumstances like the Pensioner requiring money for the treatment of any critical/terminal illness of self or spouse. The Surrender Value payable in such cases shall be 98% of Purchase Price.

Loan:
Loan facility is available after completion of 3 policy years. The maximum loan that can be granted shall be 75% of the Purchase Price. The rate of interest to be charged for loan amount shall be determined at periodic intervals.

Free Look period:
If a policyholder is not satisfied with the “Terms and Conditions” of the policy, he/she may return the policy to the Corporation within 15 days (30 days if this policy is purchased online) from the date of receipt of the policy stating the reason of objections. The amount to be refunded within free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty and pension paid, if any.

Question 12.
Which farmers are covered under PMFBY?
Answer:
PRADHAN MANTRI FASAL BIMA YOJAIMA (PMFBY)
Objectives:

1. Providing financial support to farmers suffering crop loss / damage arising out of unforeseen events.
2. Stabilizing the income of farmers to ensure their continuance in farming.
3. Encouraging farmers to adopt innovative and modern agricultural practices.
4. Ensuring flow of credit to the agriculture sector which contributes to food security, crop diversification and enhancing growth and competitiveness of agriculture sector besides protecting farmers from production risks.

Coverage of Farmers:

1. All farmers including sharecroppers and tenant farmers growing the notified crops in the notified areas are eligible for coverage.
2. Compulsory Component
   All farmers availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions (i.e. loanee farmers)for the notified crop(s) would be covered compulsorily.
3. Voluntary Component
   The Scheme would be optional for the non-loanee farmers.
4. Special efforts shall be made to ensure maximum coverage of SC/ ST/ Women farmers under the scheme.

Crops covered by PMFBY
(a) Food crops (Cereals, Millets and Pulses)
(b) Oilseeds
(c) Annual Commercial / Annual Horticultural crops.

Main conditions of sum insured / coverage limit in PMFBY

1. Sum insured per hectare for both loanee and non loanee farmers is same and equal to the Scale of Finance as decided by the District Level Technical Committee
2. Sum insured for individual farmer is equal to the Scale of Finance per hectare multiplied by area of the notified crop proposed by the farmer for insurance. Area under cultivation shall always be expressed in hectare.
3. Sum insured for irrigated and un-irrigated areas may be separate.

Premium rates and premium subsidy on PMFBY

1. For Kharif crops, the farmer’s part of premium is 2% of sum assured.
2. For Rabi crops, the farmer’s part of premium is 1.5% of the sum assured.
3. For annual commercial and horticultural crops, the farmer’s part of premium is 5%.

The remaining part of premium is paid equally by the central and respective state governments. All funds for this scheme come from Krishi Kalyan Kosh. The Government under this system has migrated from claim based insurance scheme to an up front subsidy for premium based system. It is a demand driven scheme, therefore no targets are fixed.