RBI Approves New Interest Subvention Rates on KCC Crop Loans for FY23, FY24

The government of India introduced the interest subvention scheme (ISS) to provide short-term crop loans and short-term loans for allied activities, such as animal husbandry, dairy, fisheries, bee-keeping, and so on, up to an overall limit of Rs 3 lakh to farmers through KCC at a concessional interest rate for farmers.

On Wednesday, November 23, the Reserve Bank of India (RBI) announced that the government has approved the interest subvention scheme available through the Kisan Credit Card (KCC) with modifications for the fiscal years 2022-23 and 2023-24.

According to an RBI notification, the applicable lending rate to farmers will be 7%, and the rate of interest subvention to lending institutions will be 1.5 percent.

The interest subvention will be calculated on the loan amount from the date of disbursement until the date of actual repayment of the loan by the farmer or until the due date of the loan fixed by the banks, whichever is earlier, up to a maximum period of one year.

In addition, farmers who repay on time will receive an additional interest subvention of 3% per year for a maximum period of one year from the date of disbursement.

Farmers who repay on time as described above will also be eligible for short-term crop loans and/or short-term loans for allied activities such as animal husbandry, dairy, fisheries, beekeeping, and so on, at a rate of 4% per year during fiscal years 2022-23 and 2023-24.

This benefit, however, will not be available to farmers who repay their Agri loans within one year of receiving them.

The interest subsidy will be provided to lending institutions, including public and private sector banks, small finance banks, and computerized primary agricultural cooperative societies. To ensure farmers receive benefits without difficulty, Aadhar linkage will remain required for short-term loans in 2022-23 and 2023-24.