Interest subvention scheme for farmers

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Background :Credit is a critical input in achieving high productivity and overall production in the agricultural sector. 

To meet various obligations arising from interest subvention being provided to the farmers on short term crop loans, as also loans on post harvest storages meets an important input requirement of the farmers in the country.  This institutional credit will help in delinking the farmers from non-institutional sources of credit, where they are compelled to borrow at usurious rates of interest. 

Flowing measures took by Government :


  1. Interest subvention for short term crop loans
  2. Interest subvention for post harvest loans
  3. Interest subvention for relief to farmers affected by natural calamities
  4. Interest subvention under Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)



Sailent features of interest subvention scheme :
  • The Central Government provides to all farmers for short term crop loan upto one year for loan upto Rs. 3 lakhs borrowed by them.
  • Under this scheme, the farmers can avail concessional crop loans of upto Rs.3 lakh at 7 per cent rate of interest. It also provides for an additional subvention of 3 per cent for prompt repayment within a period of one year from the date of advance. The scheme will help farmers to avail short term crop loans up to Rs. 3 lakh payable within one year at only 4 per cent per annum.  In case farmers do not repay the short term crop loan in time they would be eligible for interest subvention of 2% as against 5% available above.
  • The amount of interest subvention will be calculated on the crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of the crop loan by the farmer or up to the due date of repayment of crop loan fixed by the bank whichever is earlier subject to a maximum period of one year.
  • Interest Subvention would be available only on credit requirement for cultivation of crops and post-harvest loan components under ST limit of KCC. Limit towards household / consumption requirement / maintenance expenses of farm assets, term loan etc. will be outside the purview of the Interest Subvention Scheme.
  • To ensure hassle-free benefit to farmers under Interest Subvention scheme, the lending institutions may make Aadhar linkage mandatory for availing short term crop loans during 2018-19 and 2019-20.

Interest subvention for post harvest loans

As a measure to check distress sale, post-harvest loans for storage in accredited warehouses against Negotiable Warehouse Receipts (NWRs) are available for upto 6 months for KCC holding small & marginal farmers. The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI.
In order to give relief to small and marginal farmers who would have to borrow at 9% for the post harvest storage of their produce, the Central Government has approved an interest subvention of 2% i.e an effective interest rate of 7% for loans upto 6 months. Subvention (incentive) for prompt repayment will not be available to the farmers for loans extended against NWRs.

Interest subvention for relief to farmers affected by natural calamities

To provide relief to the farmers affected by Natural Calamities, the interest subvention of 2% will be provided to Banks for the first year on the restructured amount. Such restructured loans will attract normal rate of interest from the second year onwards as per the policy laid down by the RBI.
However, to provide relief to farmers affected by severe natural calamities, Interest Subvention of 2% will be available to Banks for the first three years/entire period (subject to a maximum of five years) on the restructured loan amount. Further, in all such cases, the benefit of prompt repayment incentive @3% per annum shall also be provided to the affected farmers.

Interest subvention under Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM)



The Ministry of Rural Development, Government of India launched a new programme known as National Rural Livelihoods Mission (NRLM) by restructuring and replacing the Swarnjayanti Gram Swarozgar Yojana (SGSY) scheme with effect from April 01, 2013. NRLM was renamed as Deendayal Antyodaya Yojana – National Livelihoods Mission (DAY-NRLM) with effect from March 29, 2016.
DAY-NRLM is the flagship program of Govt. of India for promoting poverty reduction through building strong institutions of the poor, particularly women, and enabling these institutions to access a range of financial services and livelihood services.
DAY-NRLM has a provision for interest subvention, to cover the difference between the Lending Rate of the banks and 7%, on all credit from the banks/ financial institutions availed by women SHGs, for a maximum of ₹ 3,00,000 per SHG. This will be available across the country in two ways:
  • In 250 identified districts, banks will lend to the women SHGs @7% up to an aggregated loan amount of Rs 3,00,000/-.The SHGs will also get additional interest subvention of 3% on prompt payment, reducing the effective rate of interest to 4%.
  • In the remaining districts also, all women SHGs under DAY-NRLM will be SHGs are eligible for interest subvention to the extent of difference between the lending rates and 7% for the loan up to Rs 3,00,000, subjected to the norms prescribed by the respective SRLMs. This part of the scheme will be operationalized by SRLMs.



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