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Interest Subvention Scheme

The Government of India has launched the Interest Subvention Scheme (ISS) for farmers by providing credit to farmers at concessional rate of interest. The farmers can get short term crop loans up to Rs. 3 lakh at a interest rate of 7 per cent for one year under the interest subvention scheme. In this article, we look at the Interest Subvention Scheme (ISS) in detail.

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Objective of the Scheme

The primary objective of the ISS scheme is to provide agricultural credit for Short Term crop loans at an affordable rate, which was initiated to achieve high productivity and overall production in the agricultural sector and it is extended on a yearly basis.

Features of Interest Subvention Scheme

The below listed are some of the salient features of the Interest Subvention Scheme (ISS) by the Government of India.

• The farmers can avail crop loans of up to Rs. 3 lakh at 7% rate of interest and on prompt repayment by the farmer within a period of one year.
• The short term crop loans are provided at an interest rate of 4% per annum in case of prompt payee farmers. The effective rate of interest will be about 4% for short term crop loans.
• The amount is given to Public Sector Banks/ Private Sector Banks (PSBs), Regional Rural Banks (RRBs) and Cooperative Banks on use of own funds and NABARD for refinancing to RRBs and Cooperative Banks
• The scheme initiated by NABARD and RBI offers post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts for a period of 6 months.
• If farmers payee do not repay the crop loan (short term) on the date, then they would be eligible for the interest of 2 per cent as against 5% available above.
• The amount of subsidy is to be calculated on the amount of crop loan from the disbursement date up to the date of repayment.

Government Budgetary Support

The government has allocated Rs. 20,339 crores approximately for interest subvention during 2017-2018. Further, this scheme will be implemented through the DBT mode from the current financial year.

Interest Subvention for Post Crop Loans

The post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) as a measure to check distress sale. Loans are available for up to 6 months for KCC holding small and marginal farmers. NABARD and RBI will implement this scheme as it continues for one year.

The farmers who have to borrow 9 per cent for the post-harvest warehouse of their produce, the central government have been allowed an interest subvention of 2 per cent (i.e.) an effective interest rate of 7% for these loans up to 6 months.

Interest subvention under Deendayal Antyodaya Yojana

The provision for interest subvention under DAY-NRLM is mainly to cover the difference between the lending banks rate and 7 per cent.

This is available in two ways:

• In identified countries, the banks will lend 7% up to an aggregated loan amount to the women SHGs. An additional interest subvention of 3% will be provided to SHGs on prompt payment, reducing the rate of interest to 4 per cent.
• In the remaining districts, DAY-NRLM compliant women SHGs will be registered with SRLMs. The SHGs are eligible for interest subvention to the extent of the difference between the lending amounts and 7 per cent for the loan up to Rs. 3 lakhs subjected to the norms designated by the respective SRLMs. SRLMs will operationalise this part of the scheme.