Cabinet approves interest subvention of 1.5% on short term agri loan up to Rs 3 lakh

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the restoration of interest subvention of 1.5 per cent on short term agriculture loans for all financial institutions for lending short term agri-loansuptoRs 3 lakh to the farmers. The interest subvention of 1.5 per cent will be provided to lending institutions including public sector banks, private sector banks, small finance banks, regional rural banks, cooperative banks, and computerised PACS for financial year 2022-23 to 2024-25. 

The cabinet’s approval of interest subvention will require additional budgetary provisions of Rs 34,856 crore for the period. 

The government said that the increase in interest subvention will ensure the sustainability of credit flow in the agriculture sector as well as the financial health of the lending institutions. Banks will be able to absorb the increase in cost of funds and will be encouraged to grant loans to farmers for short terms. 

This scheme will lead to the generation of employment since short-term agri-loans are provided for all kinds of activities, including animal husbandry, dairying, poultry and fisheries. 

While repaying the loan in time, farmers will continue to avail short-term agriculture credit at an interest rate of 4 per cent. 

The Kisan Credit Card scheme was introduced by the government to ensure hassle-free credit availability at cheap rates to farmers. It was introduced to empower farmers to purchase agriculture products and services on credit. “To ensure that the farmers have to pay a minimal interest rate to the bank,the Government of India introduced Interest Subvention Scheme (ISS), now renamed as Modified Interest Subvention Scheme (MISS), to provide short term credit to farmers at subsidized interest rates,” stated the cabinet. 

Under this scheme, short term agriculture loan up to Rs 3 lakh is available to farmers engaged in agriculture, animal husbandry, dairying, poultry, fisheries at the rate of 7 per cent per annum. An additional 3 per cent subvention (Prompt Repayment Incentive - PRI) is also given to the farmers for prompt and timely repayment of loans.

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