Cabinet approves interest subvention of 1.5% per annum on Short Term Agriculture Loan upto Rs 3 lakh

Tags: National Government Schemes Economics/Business

The Union Cabinet chaired by the Prime Minister has approved restoration of interest subvention on short-term agricultural loans to 1.5 percent for all financial institutions.


  • This decision has been taken to ensure adequate credit flow to the agriculture sector.
  • Against short term loans of up to Rs 3 lakh given to farmers for the financial years 2022-23 to 2024-25 to lending institutions (public and private sector banks, small finance banks, regional rural banks, co-operative banks) 1.5 percent interest subvention will be given.

  • Under this, an additional budgetary provision of Rs 34,856 crore would be required for the period from 2022-23 to 2024-25 for increasing the interest subvention.

Background :

  • Ensuring uninterrupted credit to farmers at affordable rates has been the top priority of the Government of India.

  • Keeping this in mind, the Kisan Credit Card scheme was launched for the farmers, to empower them to buy agricultural products and services by taking loans at any time.

  • To ensure that farmers can pay the minimum rate of interest to the bank, the Government of India launched the Interest Subvention Scheme (ISS), which has now been renamed as the Revised Interest Subvention Scheme (RISS).

  • Its objective is to provide short term loans to farmers at low interest rates.

Benefit to farmers :

  • The increase in interest subvention will help in ensuring stability of credit flow to the agriculture sector.

  • This will ensure the financial position and viability of the lending institutions especially the Regional Rural Banks and Co-operative Banks.

  • This will ensure adequate agricultural credit to the rural economy.

  • More and more farmers will get the benefit of agriculture loan.

  • This will help in employment generation, as short term agricultural loans are provided for all activities including animal husbandry, dairy, poultry, fisheries.

Kisan Credit Card Scheme :

  • It provides loans to farmers all over India so that farmers can reduce the financial crunch during farming.

  • It was introduced in 1998 by National Bank for Agriculture and Rural Development on the recommendation of R V Gupta.

  • In 2004, it was extended for investment in non-farm activities keeping in view the credit requirement of farmers.

  • In Budget-2018-19, the government announced the extension of the Kisan Credit Card (KCC) facility to fisheries and animal husbandry farmers.

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