Interest Subvention Scheme: Eligibility, Short-Term Crop Loans And Post Harvest Loans Interest Subvention

The interest subvention scheme refers to short-term credit to farmers at a subsidized interest rate. While this policy came into effect from the Kharif season 2006-07, the scheme is being implemented for 2022-23 to 2024-25. The recipients of this scheme will be the public sector banks (PSBs), small finance banks, cooperative banks, and regional rural banks (RRBs) on the use of their funds and to the National Bank for Agriculture and Rural Development (NABARD) for refinance to co-operative banks and RRBs. Both RBI and NABARD are implementing the interest subvention scheme. 

Eligibility: 

• Owners or cultivators such as farmers, individuals, or joint borrowers

• Sharecroppers, oral lessees, and tenant farmers

• Joint liability groups (JLGs) or self-help groups (SHGs) of farmers, which include sharecroppers, etc. 

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Short-Term Crop Loans Interest Subvention

The farmers get short-term crop loans for up to one year from the central government for loans up to Rs 3 lakh borrowed by them. 

The farmers can avail of concessional crop loans of up to Rs 3 lakh at a seven per cent rate of interest, under this scheme. They can also receive an additional subvention of three per cent for quick repayment within one year from the date of advance. The farmers can avail of short-term crop loans with this scheme up to Rs 3 lakh payable within one year at only four per cent per annum. Moreover, they are eligible for interest subvention of two per cent as against the five per cent available above, in case the farmers do not repay the short-term crop loan in time. 

The amount of interest subvention is calculated on the crop loan amount by the farmer from the date of its disbursement up to the date of actual repayment of the crop loan. Or it is calculated up to the due date of repayment of crop loan decided by the bank, whichever is earlier subjected to a maximum period of one year. 

Only on credit requirement for cultivation of crops and post-harvest loan components under the ST limit of KCC, interest subvention would be available. The factors outside the purview of the interest subvention scheme would be limited to household/consumption requirements/maintenance expenses of farm assets, term loans, etc.

Post Harvest Loan Interest Subvention

To put a check on distress sales, post-harvest loans for storage in accredited warehouses against negotiable warehouse receipts (NWRs) are available for up to six months for KCC-holding small and marginal farmers. The interest subvention scheme will be implemented by the RBI and NABARD and will continue for one year. 

The central government has approved an interest subvention of two per cent i.e. an effective interest rate of seven per cent for a loan of up to six months, to give relief to small and marginal farmers who would have to borrow at nine per cent for the post-harvest storage of their produce. To the farmers for loans extended against NWRs, subvention (incentive) for prompt repayment will not be available.