Government Continues Interest Subvention to Support Farmers
In a pivotal move aimed at bolstering the agricultural sector, the Union Cabinet has approved the continuation of the Modified Interest Subvention Scheme (MISS) for the financial year 2025-26. This initiative will provide a 1.5% interest subvention to banks for short-term crop loans of up to ₹3 lakh, accessible through the Kisan Credit Card (KCC) platform. As a result, farmers will benefit from an effective interest rate of just 4% on these loans, contingent upon timely repayment and the utilization of a 3% Prompt Repayment Incentive (PRI).
Benefits for Farmers
The continuation of the Modified Interest Subvention Scheme offers several advantages for farmers across India. One of the most significant benefits is the provision of affordable loans, allowing farmers to access working capital at a remarkably low interest rate of just 4%. This rate is among the lowest available globally, making it easier for farmers to manage their financial needs. Additionally, the KCC provides flexible credit access, allowing farmers to withdraw funds as needed over a period of up to five years. This revolving credit system is particularly beneficial for managing seasonal cash flow.
In times of natural disasters, the scheme also provides essential support. Farmers can receive interest relief for up to one year following a calamity, and in cases of severe disasters, this relief can extend to five years. The scheme is especially supportive of small and marginal farmers, who now hold 76% of agricultural credit accounts, reinforcing their vital role in the agricultural landscape. Furthermore, loans up to ₹2 lakh can be obtained without the need for collateral, making it easier for farmers to secure funding. This easy access to credit enables farmers to invest in better seeds, fertilizers, and tools, ultimately boosting productivity and income.
Growth in Agricultural Credit
The success of the Kisan Credit Card scheme is evident in the substantial growth of credit flow to farmers. Since 2014, the credit flow through KCC has more than doubled, rising from ₹4.26 lakh crore to ₹9.81 lakh crore by 2024. Overall agricultural credit has also seen a significant increase, climbing from ₹7.3 lakh crore to ₹25.49 lakh crore during the same period. This growth reflects a shift towards institutional credit, which now constitutes over 75% of total agricultural financing, thereby reducing farmers’ reliance on informal moneylenders.
Moreover, the reduction in Non-Performing Assets (NPAs) in the agriculture sector highlights improved credit performance. NPAs decreased from 8.9% in 2019 to 7.2% in 2023, while KCC NPAs fell from 12.66% in 2021-22 to 11.5% in 2023-24. This trend indicates better recovery rates and a healthier financial environment for farmers.
Digital Innovations for Transparency
To enhance transparency and efficiency, the government has introduced the Kisan Rin Portal (KRP). This digital platform allows for the tracking of interest subvention claims, ensuring faster disbursement and greater accountability for both farmers and banks. The KRP aims to streamline the process, making it easier for farmers to access the benefits of the scheme while providing banks with a reliable mechanism for managing claims.
Future Prospects
Looking ahead, the government is committed to further enhancing the KCC limit to ₹5 lakh, as outlined in the Union Budget for 2025. While this proposal is currently under consideration, the recent Cabinet decision guarantees the ongoing support for farmers under the existing provisions of the Modified Interest Subvention Scheme. This commitment underscores the government’s dedication to strengthening the agricultural sector and ensuring that farmers have the resources they need to thrive.
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