Recently, Union Cabinet approved the continuation of the Interest Subvention component under the Modified Interest Subvention Scheme for the financial year 2025-26, and approved required fund arrangements.
About Modified Interest Subvention Scheme
- Type: Central Sector Scheme
- Objective: To ensure availability of short-term credit to farmers at an affordable interest rate through Kisan Credit card (KCC).
- Key Features:
- Farmers receive short-term loans of up to ₹3 lakh through KCC at a subsidized interest rate of 7%, with 1.5% interest subvention provided to eligible lending institutions.
- Farmers repaying loans promptly are eligible for an incentive of up to 3% as Prompt Repayment Incentive effectively reducing their interest rate on KCC loans to 4%.
- For loans taken exclusively for animal husbandry or fisheries, the interest benefit is applicable up to ₹2 lakh.
- Implemented by: Reserve Bank of India (RBI)/National Bank for Agriculture and Rural development (NABARD).
Other mechanism to improve Agricultural Credit
- Agriculture Infrastructure Fund (AIF): Provides medium to long-term loans for farm-gate storage and logistics to cut post-harvest losses and reduce intermediaries.
- Promotion of Renewable Energy: PM-KUSUM provides subsidies (30–50%) for solar pumps, solarizing existing pumps, and installing solar power plants to cut emissions and improve rural energy access.
- Voluntary Carbon Market (VCM): 11 agricultural projects registered on the Veera VCS platform promoting sustainable farming and generating carbon credits.
