In a bid to boost agricultural productivity and production in the country, the Union Cabinet headed by Prime Minister Narendra Modi, has approved the Interest Subvention Scheme (ISS) and earmarked a sum of Rs 20,339 crore for this purpose. Under the scheme, the Centre will provide an interest subvention of 5% per annum to all prompt payee farmers for short term crop loan up to one year for loan up to Rs 3 lakh borrowed by them during the year 2017-18. Thus, farmers will have to effectively pay only 4% as interest. In case farmers do not repay their loan in time, they would be eligible for interest subvention of 2% instead of 5%.
For providing relief to farmers affected by natural calamities, the government has also decided to give 2% interest subsidy for first year on the restructured amount. Apart from this, farmers will also get loans for post-harvest storage of their produce at a subsidised interest rate of 7% for six months. The Cabinet decision to continue the interest subvention comes at a time when farmers are in agitation mode in several parts of the country, especially in Madhya Pradesh, demanding loan waiver. Uttar Pradesh and Maharashtra have already announced such waiver.
The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks. The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI.