What is Interest Subvention Scheme For Farmers?
Farming is the main occupation of most Indians. According to data, there are 146.45 million farmers with a total operational holding. Most of them are small farmers. They have less than 2 hectares (five acres). These facts indicate that farmers are forced to live in poor conditions.
The ministry introduced Interest Subvention Scheme for Farmers to enhance their living standard. The government aims to provide subsidiaries to farmers. It focuses on the poor condition of farmers.
Background of Interest Subvention Scheme for Farmers
The Indian Government always thinks of farmers. That’s why to make farmer’s life easy, they introduced the Interest Subvention Scheme (ISS). It was later renamed and is now known as the Modified Interest Subvention Scheme (MISS).
The government provides short-term credit to farmers. This credit is based on subsidised interest rates. It was implemented by NABARD and RBI.
What are the Benefits of an Interest Subvention Scheme for Farmers
Some benefits of the Interest Subvention Scheme for Farmers are as follows:
- It will ensure the continuity of credit flow in the sector of agriculture.
- It protects the financial status and enthusiasm of the providing institutes particularly Cooperative and Regional Rural Banks.
- Banks are encouraged to permit loans to farmers. It leads more farmers to get into the agriculture business.
- It promotes employment since this scheme covers husbandry, dairying, poultry, fisheries, etc.
- As per the scheme, the farmers can take the advantage of concessional crop loans. It is around ₹3 lakh with a rate of interest is 7%. The farmer can take short-term crop loans up to ₹3 lakh payable within 1 year at 4 % per annum only.
- If any farmer borrowed a loan of up to ₹3 lakhs, the central government provides short-term crop loans for up to one year.
- In this scheme, the interest is estimated on the basis of a crop loan. (From the withdrawal’s date up to the date of actual compensation)
- Under the ST limit of KCC, IS would be available only on post-harvest loan components.
- Some cases are out of the range of the ISS. Term loans, limits towards household/ consumption requirements, etc., are one of them.
Interest Subvention (IS) for Post-harvest Loans
The central government up to 6 months has offered an IS of 2 percent. This decision of the government eases the loan of marginal and small farmers. Earlier, these farmers had to borrow loans at 9% interest for their post-harvest production.
Those farmers who have extended their loans against NWRs are not benefited from subvention for prompt repayment.
Interest Subvention (IS) for Relief to Farmers Affected by Natural Calamities
Crop production depends on many variables such as land, weather, and natural calamities. Natural calamities destroy agricultural assets and infrastructure, leading to a major loss for farmers. To help farmers in this situation, the government provides relief under this scheme.
For the first year on the restructured amount, the bank will be given IS of 2%. This is only provided in the case of natural calamities.
For farmers affected by severe natural calamities, the benefit of prompt repayment incentive @3 per cent shall be provided to the affected farmers. Only the High-Level Committee (HLC) can decide the benefits in cases of severe natural calamities.
This committee is formed by-
- Inter-Ministerial Central Team (IMCT)
- Sub Committee of National Executive (SC-NEC).
Interest Subvention (IS) for the Dairy Sector
Ministry of Fisheries, Animal Husbandry, and Dairying had found a new scheme. It was “Interest subvention on Working Capital Loans for Dairy sector”.
This was introduced to support Dairy Co-operatives and Farmer Producer Organisations engaged in dairy activities (SDC &FPO). The main purpose of the government was to compensate for the economic stroke of COVID-19 on the dairy sector.
This scheme offered interest subvention in case of speedy and timely repayment. IS was given on a short-term loan that was taken between 1st April 2020 and 31st March 2021. The main purpose was to turn milk into conserved products:
- Cooperative Banks
- Scheduled Commercial Banks
The goal of this scheme has now been extended for the period of 2021-22 to 2025-26 with an investment of ₹500 Crore.
The Extended Time Period on Account of COVID-19
At the time of COVID-19, due to the National Lockdown, farmers were unable to go to bank branches. They couldn’t pay their loan dues.
The government announced to carry over the 2% IS and 3% PRI for farmers. It will extend the period of repayment.