Modified Interest Subvention Scheme

Reference

On May 28, 2025, the Union Cabinet approved the continuation of the Interest Subvention component of the Modified Interest Subvention Scheme for the financial year 2025-26.

What is Modified Interest Subvention Scheme?

The objective of this central sector scheme is to ensure the availability of short-term loans to farmers at affordable interest rates through Kisan Credit Card (KCC).

Salient features of the scheme

• Concession in interest rate: Short-term loans up to Rs. 3 lakh are made available to farmers through KCC at a concessional interest rate of 7%.
  • Apart from this, the government gives an interest subvention of 1.5% to the eligible lending institutions (or banks) which reduces the cost of the loan.
• Additional benefit on timely payment: If farmers repay the loan on time, they are given an additional rebate of 3% which is called 'Prompt Repayment Incentive' (PRI). Due to this, the effective interest rate for farmers remains only 4%.
• Special provision for animal husbandry and fisheries: If the loan is taken only for animal husbandry or fisheries, then interest benefit is available up to ₹ 2 lakh.

Major achievements of the scheme

Kisan Credit Cards and overall agricultural credit flow have seen a significant increase, which shows the success of this scheme:

• Loan disbursement through KCC: Increased from Rs 4.26 lakh crore in the year 2014 to Rs 10.05 lakh crore by December 2024.
• Total agricultural credit flow: Increased from Rs 7.3 lakh crore in the financial year 2013-14 to Rs 25.49 lakh crore in the year 2023-24.
• Digital reforms: The Kisan Rin Portal (KRP) launched in August 2023 has increased transparency and efficiency in the processing of claims.

Significance of the scheme

• Increase in agricultural productivity: Cheap loans under this scheme enable farmers to invest in modern agricultural techniques, improved seeds, fertilizers and machinery. This improves crop productivity and quality, which is important for food security and the rural economy.
• Financial Inclusion: By linking small and marginal farmers to the formal credit system, the scheme reduces their dependence on non-institutional moneylenders who often charge high interest rates.
• Over 7.75 crore KCC accounts reflect the inclusive nature of the scheme.
• Affordable Credit Facility: Considering the current borrowing cost, average MCLR and repo rate trends, an interest Subvention of 1.5% is essential to support rural and cooperative banks and ensure continuity of affordable credit to farmers.
• Doubling Farmers’ Income: The scheme reinforces the government’s commitment to doubling farmers’ income.

Conclusion

The continuation of the Modified Interest Subvention Scheme (MISS) is an important step towards ensuring availability of affordable and timely credit to farmers. This scheme not only boosts agricultural productivity and financial inclusion but also underlines the government's commitment to doubling farmers' income and strengthening the rural economy. Along with digital reforms and increasing credit flow, this scheme provides a strong foundation for India's agriculture sector.