Union Cabinet chaired by PM Modi has approved the Interest Subvention Scheme (ISS) for farmers for the year 2017-18. This will help farmers getting short-term crop loan up to Rs. 3 lakh payable within one year at only 4% per annum.  The Government has earmarked a sum of Rs. 20,339 crore for this purpose.

The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks. The scheme will continue for one year and it will be implemented by NABARD and RBI.

The objective of the scheme is to make available at ground level, agricultural credit for short-term crop loans at an affordable rate to give a boost to agricultural productivity and production in the country.

As per the scheme mandate, the Central Government will provide interest subvention of 5 per cent per annum to all prompt payee farmers for short-term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them during 2017-18. Farmers will thus have to effectively pay only 4% as interest. In case farmers do not repay the short-term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.

 In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e. an effective interest rate of 7% for loans upto 6 months.

To provide relief to the farmers affected by natural calamities, the interest subvention of 2% will be provided to banks for the first year on the restructured amount. In case farmers do not repay the short-term crop loan in time they would be eligible for interest subvention of 2% as against available above.

While the farmers are advised to undertake online trade, it is also important that they avail themselves of post-harvest loans by storing their produce in the accredited warehouses.  The loans are available to Kisan Credit Card (KCC) holding small and marginal farmers at     interest subvention of 2 per cent on such storages for a period   of upto six months.  This will help the farmers to sell when they find the market is buoyant, and avoid distress sale.  It is, therefore, needful for the small and marginal farmers to keep their KCCs alive.

The Government is keen in improving income of the farmers, for which it has launched several new initiatives that encompass activities from seed to marketing.  The credit from institutional sources will complement all such government initiatives like Soil Health Card, Input Management, Per Drop More Crop in Pradhan Mantri Krishi Sichai Yojana (PMKSY), PMFBY, e-NAM, etc.

Scheme Background  

The scheme has been running since 2006-07. Under this, the farmers can avail concessional crop loans of upto Rs.3 lakh at 7% rate of interest.  It also provides for an additional subvention of 3%.  As a measure to check distress sale, post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) are available for upto 6 months for KCC holding small & marginal farmers.  During the year 2016-17, the volume of short-term crop loan lent stood at Rs.6,22,685 crore, surpassing the target of Rs. 6,15,000 crore.




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