Kisan Credit Card: RBI extends interest subvention scheme for agri loans up to Rs 3 lakhs. Key points here

The Reserve Bank of India has extended the Modified Interest Subvention Scheme (MISS) for short-term loans fir agriculture and allied activities availed through Kisan Credit Card this financial year. This means farmers can now avail of loans up to Rs 3 lakh at concessional interest rates. Under the scheme, farmers will get loans at a concessional interest rate of 7%. An additional interest subvention of 3% per annum is provided to farmers who repay loans on time.

"This implies that the farmers repaying promptly as above would get short-term crop loans and or short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping, etc.  @ 4% per annum during the financial year 2024-25," the central bank said in a notification. 

The RBI added the rate of interest subvention to lending institutions will be 1. 5% for 2024-25.  "The limit for crop loan component will take priority for interest subvention and prompt repayment incentive benefits and the residual amount will be considered towards allied activities including animal husbandry, dairy, fisheries, bee keeping, etc.," it said. 

For smooth facilitation of benefits to farmers through the Modified Interest Subvention Scheme, the requirement for Aadhaar linkage will persist as mandatory for accessing the specified short-term loans during the fiscal year 2024-25.

Key features

1. Interest subvention for short-term loans

Farmers will have the opportunity to access short-term crop loans, as well as loans for various allied activities such as animal husbandry, dairy, fisheries, and beekeeping, at a concessional interest rate of 7% per annum. 

Lending institutions including Public Sector Banks (PSBs), Private Sector Banks (specifically for loans through rural and semi-urban branches), Small Finance Banks (SFBs), and computerized Primary Agriculture Cooperative Societies (PACS) affiliated with Scheduled Commercial Banks (SCBs) will benefit from an interest subvention of 1.50%.

2. Timely repayment

RBI has announced that farmers who are able to repay their loans promptly will be eligible for an additional interest subvention of 3%. This will effectively lower the interest rate to 4% per annum for those who make timely repayments within one year.

3. Loan limit

The interest subvention and prompt repayment incentive, which are financial assistance programs, have a combined annual limit of Rs 3 lakh. For farmers who are exclusively involved in allied activities, there is a specific sub-limit of Rs 2 lakh within the overall Rs 3 lakh cap.

Priority will be given to the crop loan component, with any remaining amount available for allied activities.

4. Distress sale

In order to discourage distress sale by farmers and encourage them to store their produce in warehouses, the benefit of interest subvention under the Kisan Credit Card (KCC) scheme will be available to small and marginal farmers for an extended period of up to six months following the harvest of the crop. This initiative aims to provide farmers with financial support and stability in managing their agricultural produce effectively, leading to better market conditions and enhanced economic prospects for the farming community.

5. Natural calamities 

The RBI stated that in order to assist farmers impacted by natural disasters, banks will have access to the current rate of interest subvention for the initial year on the reorganised loan sum. After the first year, the restructured loans will be subject to the standard interest rate.

Rural credit status

Minister of State for Finance Pankaj Chaudhary recently presented data showcasing the significant increase in ground-level credit in rural areas, highlighting a rise from Rs 7.3 lakh crore in 2014 to Rs 25.46 lakh crore in 2024. This surge has been implemented to facilitate easier access to financial benefits for the populace. 

During discussions in the Lok Sabha, MoS Chaudhary disclosed that a notable amount of Rs 4.26 lakh crore in crop loans were disbursed to farmers under the Kisan Credit Card scheme, a substantial increase from the 2014 figures, which stood at Rs 9.82 lakh crore. 

Furthermore, he emphasized the government's dedication towards the welfare and enhancement of agricultural production through various measures. Notably, the minister highlighted the extensive reach of the Pradhan Mantri Jan Dhan Yojana (PMJDY) by revealing the opening of over 52 crore accounts to promote financial inclusion nationwide.