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Interest Subvention Scheme for Agricultural Loans

Reserve Bank of India (RBI) has published the modified interest subvention scheme for short-term loans for agriculture and allied activities availed through Kisan Credit Card (KCC) during the financial years 2022-23 and 2023-24.

Which loans are covered under interest subvention scheme (ISS)?

The short-term crop loans and short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping etc. up to an overall limit of ₹3 lakh to farmers through KCC during the years 2022-23 and 2023-24 will be covered for interest subvention.

Which lending institutions are covered under ISS?

The ISS is applicable to the lending institutions viz. Public Sector Banks (PSBs) and Private Sector Banks (in respect of loans given by their rural and semi-urban branches only), Small Finance Banks (SFBs) and computerized Primary Agriculture Cooperative Societies (PACS) which have been ceded with Scheduled Commercial Banks (SCBs), on use of their own resources. 

How much is the interest subvention?

The applicable lending rate to farmers and the rate of interest subvention for the financial years 2022-23 and 2023-24 will be as follows –

Financial Year Lending rate to farmers Rate of Interest Subvention to Lending Institutions
2022-23 7% 1.50%
2023-24 7% 1.50%

When is additional interest subvention applicable?

  • An additional interest subvention of 3% per annum will be provided to such of those farmers repaying in time.
  • This implies that the farmers repaying promptly as above would get short-term crop loans and / or short-term loans for allied activities including animal husbandry, dairy, fisheries, bee keeping etc. @ 4% per annum during the financial years 2022-23 and 2023-24. 
  • This benefit would not accrue to those farmers who repay their agri loans after one year of availing such loans.

What are sub-limits for interest subvention?

  • Interest subvention and prompt repayment incentive benefits on short-term crop loans and short-term loans for allied activities will be available on an overall limit of ₹3 lakh per annum subject to a maximum sub-limit of ₹2 lakh per farmer in respect of those farmers involved only in activities related to animal husbandry, dairy, fisheries, bee keeping etc. 
  • The limit for crop loan component will take priority for interest subvention and prompt repayment incentive benefits and the residual amount will be considered towards allied activities including animal husbandry, dairy, fisheries, bee keeping etc.

What are relaxations under ISS for small and marginal farmers?

To discourage distress sale by farmers and to encourage them to store their produce in warehouses, the benefit of interest subvention under KCC will be available to small and marginal farmers for a further period of up to 6 months post the harvest of the crop against negotiable warehouse receipts on the produce stored in warehouses accredited with Warehousing Development Regulatory Authority (WDRA), at the same rate as applicable to the crop loan.

What is the applicability of ISS in cases of natural calamities?

  • To provide relief to farmers affected by natural calamities, the applicable rate of interest subvention for that year will be made available to banks for the first year on the restructured loan amount. Such restructured loans will attract normal rate of interest from the second year onwards.
  • To provide relief to farmers affected due to severe natural calamities, the applicable rate of interest subvention for that year will be made available to banks for first three years / entire period (subject to a maximum of five years) on the restructured loan amount. 
  • In all such cases, the benefit of prompt repayment incentive @3% per annum shall also be provided to the affected farmers.
  • The grant of such benefit in cases of severe natural calamities shall, however, be decided by a High Level Committee (HLC) based on the recommendations of the Inter-Ministerial Central Team (IMCT) and Sub Committee of National Executive Committee (SC-NEC).

How is interest subvention calculated?

The additional interest subvention will be calculated from the date of disbursement of the loans up to the actual date of repayment or up to the due date fixed by the banks for repayment of such loans, whichever is earlier, subject to a maximum period of one year from the date of disbursement. 

When shall claims be submitted by banks under ISS?

  • Lending banks may submit their eligible pending audited claims of previous scheme years as well as for 2020-21, if any, to RBI latest by December 31, 2022.
  • In respect of interest subvention, banks are required to submit their claims on annual basis duly certified by their Statutory Auditors as true and correct, within a quarter from the close of the year. Any remaining claim pertaining to the disbursements made during the years 2022-23 and 2023-24 and not included in the claim as on March 31 of the corresponding financial year may be consolidated separately and marked as an 'Additional Claim' and submitted latest by June 30, 2024, and June 30, 2025 respectively, duly certified by the Statutory Auditors as true and correct.
  • In respect of prompt repayment incentive, banks may submit their one-time consolidated claims pertaining to the disbursements made during the years 2022-23 and 2023-24, accompanied by Statutory Auditors’ certificate certifying the claim as true and correct, within a quarter from the close of the financial year. Any remaining claim pertaining to the disbursements made during the years 2022-23 and 2023-24 and repaid promptly during 2023-24 and 2024-25 respectively, may be consolidated separately and marked as an 'Additional Claim' and submitted latest by June 30, 2024 and June 30, 2025, duly certified by the Statutory Auditors as true and correct.


References

Reserve Bank of India. (2022, November 23). 'Modified Interest Subvention Scheme for Short Term Loans for Agriculture and Allied Activities availed through Kisan Credit Card (KCC) during the financial years 2022-23 and 2023-24'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12411&Mode=0


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