Union Cabinet approves interest subvention scheme for agriculture loans

Source: The post is based on the article “Union Cabinet approves interest subvention scheme for agriculture loans” published in TOI on 17th August 2022.

What is the News?

The Union Cabinet has approved the Modified Interest Subvention Scheme(MISS).

What is the Modified Interest Subvention Scheme(MISS)?

Background: Kisan Credit Card scheme was introduced by the Government to empower farmers to purchase agriculture products and services on credit at any time. 

To ensure that the farmers have to pay a minimal interest rate to the bank, the Government of India introduced Interest Subvention Scheme (ISS), now renamed as Modified Interest Subvention Scheme(MISS).

Aim: To provide short-term credit to farmers at subsidized interest rates.

Features of the scheme: Under the scheme, a short-term agriculture loan upto Rs. 3.00 lakh is available to farmers engaged in Agriculture and other allied activities including Animal Husbandry, Dairying, Poultry, and fisheries at the rate of 7% p.a. 

– An additional 3% subvention (Prompt Repayment Incentive – PRI) is also given to the farmers for prompt and timely repayment of loans. Therefore, if a farmer repays his loan on time, s/he gets credit at the rate of 4% p.a. 

– This support is 100% funded by the Centre.

Significance of the scheme: This scheme is the second-largest scheme of the Department of Agriculture and Farmers’ Welfare(DA&FW) as per budget outlay and coverage of beneficiaries. 

– Increase in Interest Subvention will ensure the sustainability of credit flow in the agriculture sector as well as ensure the financial health and viability of the lending institutions.

– This will also lead to a generation of employment since short-term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, and fisheries.