Interest Subvention Scheme
About scheme
The Government has been implementing Interest Subvention Scheme since 2006-07. Government had decided to ensure that farmers receive short term credit at the ground level at 7% with an upper limit of Rs.3.00 lakh for a maximum period of one year for prompt repayment on or before the due date. The policy came into force with effect from Kharif 2006-07. Thus, farmers, who promptly repay their crop loans as per the repayment schedule fixed by the banks, are extended loans at an effective interest rate of 4% per annum. The Govt has extended the scheme to crop loans borrowed from private sector scheduled commercial banks in respect of loans given within the service area of the branch concerned.
| Interest Subvention Scheme | |
| Interest Rate on KCC | 9% |
| Relief due to Interest Subvention Scheme | -2% |
| Relief due to promptly repay the loans on or before the due date or the date fixed by the bank | -3% |
| Final Effective Interest Rate | 4% |
Q. What is the interest rate given to farmers who taken a loan of ₹3 lakh if the farmer has repaid the loan on time?(IBPS-AFO 2018)
- 4%
- 3%
- 2%
- 7%
- 9%
Objectives :
The objective of the Interest Subvention Scheme is to make available agricultural credit at ground level, for Short Term crop loans at an affordable Interest rate to give a boost to agricultural productivity and production in the country.
Progress:
During the financial year 2018-19, the Government allocated a sum of Rs.15,000 crore to Department of Financial Services for settling the claims under Interest Subvention Scheme and the entire sum was released to RBI/ NABARD, the implementing agencies.
(Rs. crore)
| Year | Budget allocation | Actual Expenditure | |
| 1 | 2014-15 | 6,000 | 6,000 |
| 2 | 2015-16 | 13,000 | 13,000 |
| 3 | 2016-17 | 13,619.13 | 13,397.13 |
| 4 | 2017-18 | 15,000 | 13,045.72 |
| 5. | 2018-19 | 15,000 | – |
| Year | Relief |
| 2007-08 | 2% |
| 2008-09 | 3% |
| 2009-10 | 2% |
| 2010-11 | 1.5% |
| 2011-12 | 2% |
| 2012-13 | 2% |
| 2013-14 | 2% |
| 2014-15 | 2% |
| 2015-16 | 2% |
| 2016-17 | 2% |
| 2017-18 | 2% |
| 2018-19 | 2% |
| Year | Additional Relief |
| 2009-10 | 1% |
| 2010-11 | 2% |
| 2011-12 | 3% |
| 2012-13 | 3% |
| 2013-14 | 3% |
| 2014-15 | 3% |
| 2015-16 | 3% |
| 2016-17 | 3% |
| 2017-18 | 3% |
| 2018-19 | 3% |
Main Features of Interest Subvention Scheme(ISS)
1. For the farmers crop loans available on lowest rate upto Rs.3 lakh at 7% rate of interest
2. If he makes promptly repay their crop loans as per the repayment schedule fixed by the banks then Farmer get an additional subvention of 3%
3. After getting both Benefits the effective rate of interest comes out to be 4% for short term crop loans.
4. The subvention is given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks
5. NABARD and RBI implemented agency of this scheme
6. This scheme also offers post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) for a period of 6 months
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