Government Approves Interest Subvention Scheme for Farmers

The Reserve Bank of India (RBI) on 7^th March 2019 informed the Centre has approved implementation of the interest subvention scheme (ISS) with modifications for the years 2018 -2019 & 2019 - 2020.

Under this scheme, the banks will grant short-term crop loans up to Rs.3 lakh at 7 % to the farmers while those who pay back promptly will get loans at 4 %. The move comes in the backdrop of the Union Budget revealing the ‘PM-KISAN’ (Pradhan Mantri Kisan Samman Nidhi) scheme, through which vulnerable landholding farmer families with cultivable land up to 2 hectares will be given direct income support at the rate of Rs. 6,000 per year.

In order to guarantee hassle-free benefits to farmers under the interest subvention scheme, banks have been advised to make Aadhaar linkage compulsory to avail short-term crop loans in the years 2018-19 & 2019-20.

To discourage distress sales by the growers and to motivate them to store their produce in warehouses, the Reserve Bank of India, as per the government’s advice, told that the benefit of ISS will be available to small & marginal farmers having Kisan Credit Card (KCC) for an additional period of up to 6 months after the harvesting of crop. And this will be at the same price as available for crop loans, against the negotiable receipts issued on stored produce in warehouses certified with the Warehousing Development Regulatory Authority.

For the farmers affected by natural disasters, an interest subvention of 2 % per year will be made available to the banks for the 1st year on the restructured loan amount. Such restructured loans will draw a normal rate of interest from the 2nd year onwards.

However, to offer such relief to cultivators, an interest subvention of 2 % per annum will be made available to banks for the 1st three years or whole period (max 5 years) on the restructured loan amount. Further, in all such cases, the advantage of prompt repayment incentive of 3 % per annum will also be given to affected farmers.