Centre restores farm loan interest subsidy as rates rise

• Union Cabinet has restored the interest subsidy on short-term agriculture loans to 1.5% for all financial institutions, including cooperative banks.

Modified Interest Subvention Scheme

• To ensure that the farmers have to pay a minimal interest rate to the bank, the GoI introduced Modified Interest Subvention Scheme (MISS).
• It aims to provide short term credit to farmers at subsidised interest rates.

Features of MISS

• Short term agriculture loan upto Rs. 3.00 lakh is available to farmers engaged in Agriculture and other allied activities including Animal Husbandry, Dairying, Poultry, fisheries etc. at the rate of 7% p.a.
• An additional 3% subvention (Prompt Repayment Incentive – PRI) is also given to the farmers for prompt and timely repayment of loans.
• Therefore, if a farmer repays his loan on time, he gets credit at the rate of 4% p.a.

Who gets the subvention?

• The lending institutions include- Public Sector Banks, Private Sector Bank, Small Finance Banks, Regional Rural Banks, Cooperative Banks and Computerised PACS directly ceded with commercial banks.

Prelims Take Away

• Kisan Credit Card
• Interest Subvention Scheme
• NBFC
• MISS