The government has approved the continuation of the interest subvention scheme (ISS) with modification for the financial years 2022-23 and 2023-24. The applicable lending rate to farmers will be 7 per cent and the rate of interest subvention to lending institutions will be 1.5 per cent, according to a notification by the RBI on Wednesday.
“In order to provide 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 Rs 3 lakh to farmers through KCC at concessional interest rate during the years 2022-23 and 2023-24, it has been decided to provide interest subvention to 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 computerised primary agriculture cooperative societies (PACS) which have been ceded with scheduled commercial banks (SCBs), on the use of their own resources,” said the RBI notification.
The interest subvention will be calculated on the loan amount from the date of disbursement/ drawal up to the date of actual repayment of the loan by the farmer or up to the due date of the loan fixed by the banks, whichever is earlier, subject to a maximum period of one year.
“An additional interest subvention of 3 per cent per annum will be provided to such of those farmers repaying in time, i.e., from the date of disbursement of the loan/s upto the actual date of repayment or upto the due date fixed by the banks for repayment of such loan/s, whichever is earlier, subject to a maximum period of one year from the date of disbursement,” the RBI said.
In August, the Union Cabinet, chaired by Prime Minister Narendra Modi, had restored the interest subvention on short-term agriculture loans to 1.5 per cent for all financial institutions, including banks, small finance banks, regional rural banks and cooperative banks. The interest subvention has been approved for the financial years from 2022-23 to 2024-25 for lending short-term agri-loans up to Rs 3 lakh to the farmers.
The increase in interest subvention support requires additional budgetary provisions of Rs 34,856 crore for the period of 2022-23 to 2024-25 under the scheme.
The RBI on Wednesday also said, “In order 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 upto six 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.”
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