What changed
The Government of India approved continuation of the Modified Interest Subvention Scheme for 2024-25. The lending rate to farmers remains 7%, with 1.5% interest subvention to lending institutions. Timely repayment incentive of 3% continues, making effective rate 4% for prompt payers.
What it means for you
Banks can claim 1.5% interest subvention on KCC loans up to ₹3 lakh for crop and allied activities. The prompt repayment incentive reduces farmer burden, improving credit discipline. Lenders must ensure timely reporting to claim subvention; non-timely repayments lose the 3% incentive.
What you must do
- Update KCC loan systems to apply 7% lending rate and track subvention claims for 2024-25.
- Ensure timely repayment monitoring to pass on 3% prompt repayment incentive to eligible farmers repaying within one year.
- Verify farmer eligibility for allied activity sub-limit of ₹2 lakh and crop loan priority.
- Implement WDRA warehouse receipt storage benefit for small/marginal farmers post-harvest for up to six months.
- Prepare for natural calamity restructured loans: first-year subvention for natural calamities, up to three years/five years for severe natural calamities as per HLC decision.
Who it affects
Public Sector Banks, Private Sector Banks (rural and semi-urban branches only), Small Finance Banks, Computerized Primary Agriculture Cooperative Societies ceded with SCBs, Farmers availing KCC loans
What is the effective interest rate for farmers who repay on time?
Farmers repaying within the due date get an additional 3% subvention, making the effective rate 4% per annum for 2024-25.
Are allied activities like dairy and fisheries covered under this scheme?
Yes, short-term loans for allied activities including animal husbandry, dairy, fisheries, and bee keeping are covered, subject to a sub-limit of ₹2 lakh per farmer.
How does the scheme benefit farmers storing produce in warehouses?
Small and marginal farmers can get interest subvention for up to six months post-harvest on negotiable warehouse receipts from WDRA-accredited warehouses, at the same rate as crop loans.