Direct Answer
The Prompt Repayment Incentive (PRI) is an additional interest subvention explicitly rewarded to farmers who clear their short-term crop loan dues on or before the due date
Step 1: Identify Initial Rate
Standard KCC Short-Term Crop Loan Rate = 7%Step 2: Apply PRI Deduction
Prompt Repayment Incentive (PRI) = -3%Step 3: Calculate Final Effective Rate
7% – 3% = 4%
Exam tip: The 3% is heavily tested. Examiners often swap it with the 1.5% subvention given to the banks, or the 2% MSME subvention. Remember: Farmers get 3% off for good behavior. The 3% incentive acts as a behavioral nudge → Farmers prioritize repaying the bank to unlock the massive discount → This drastically reduces Non-Performing Assets (NPAs) in the agricultural sector.
Standard KCC Short-Term Crop Loan Rate = 7%Step 2: Apply PRI Deduction
Prompt Repayment Incentive (PRI) = -3%Step 3: Calculate Final Effective Rate
7% – 3% = 4%
Exam tip: The 3% is heavily tested. Examiners often swap it with the 1.5% subvention given to the banks, or the 2% MSME subvention. Remember: Farmers get 3% off for good behavior. The 3% incentive acts as a behavioral nudge → Farmers prioritize repaying the bank to unlock the massive discount → This drastically reduces Non-Performing Assets (NPAs) in the agricultural sector.