In anticipation of higher credit offtake, the government has made provision of 22% higher allocation for the 2024-25 at Rs 22,600 crore under the interest subvention scheme for providing short term loans to Kisan credit cards (KCCs) against the revised estimate for the current fiscal.
As per the revised estimate for the current fiscal, Rs 18,500 crore will be the actual allocation from the agriculture ministry for the modified interest subvention scheme (MISS).
“The higher allocation under the interest subvention scheme for the next fiscal is because the overall agri-credit target for FY25 is likely to hike to Rs 22 trillion from Rs 20 trillion in the current fiscal,” an official said.
However, the budget estimate for the current fiscal was higher at Rs 23,000 crore. In FY23, actual expenditure under the scheme was Rs 17,997 crore against the revised estimate of Rs 19,700 crore.
The official said lower allocation under interest subvention against initial estimate at the beginning of the fiscal was because of compulsory budget allocation of 10% towards north-eastern states, where farm credit flow has been low.
According to a note, there has been a huge disparity in the regional outflow of agricultural credit in the country. The eight north-eastern states received agri-loans worth Rs 13,406 crore last fiscal, only 0.62% of country’s disbursement while the region has 3.2% of cropped area of the country.
Under MISS of the department of agriculture, farmers holding KCCs are provided loans upto Rs 3,00,000 at benchmark rate of 9% per annum for meeting their working capital requirement for farmers for crop production.
The government provides 2% interest subvention on the benchmark rate and additional 3% subvention is also provided to farmers for prompt repayment thus bringing down the effective rate of interest to 4% per annum. In the case of a short-term loan availed only for allied activities for allied sectors such as animal husbandry and dairying, the interest subvention is Rs 2,00,000 per KCC holders.
Currently, out of 73.6 million KCC holders, 23.7 million belong to agri-allied sectors. Officials said that the short term crop loans are used for pre-harvest activities such as weeding, sorting, harvesting, and transporting activities by the farmers besides purchase of agricultural inputs – seeds, fertilizers, or pesticides.
Under MISS, financial institutions such as public sector banks, regional rural banks (RRBs), or cooperative banks are provided with 1.5% interest subvention during FY23 to FY25. Officials said that RRBs and cooperative banks are provided refinancing facilities under the scheme.
To protect KCC card holders farmers against distress sales, the benefit of interest subvention is available for post-harvest loans against negotiable warehouse receipts for six months. For farmers impacted by severe natural calamities, interest subvention and prompt repayment incentive on restructured crop loans is also given for five years.