Understanding India’s Interest Subvention Scheme: How 77 Million Farmers Benefit from Affordable Credit
02 June 2025, New Delhi: The Government of India has extended the Modified Interest Subvention Scheme (MISS) for the financial year 2025–26, continuing its effort to provide short-term, low-cost institutional credit to farmers through the Kisan Credit Card (KCC) system. This Central Sector Scheme, with the interest subvention component approved by the Union Cabinet chaired by Prime Minister Narendra Modi, plays a pivotal role in maintaining liquidity and credit access in India’s agriculture sector.
How the Scheme Works
Through MISS, farmers are able to access short-term loans of up to ₹3 lakh at a subsidized interest rate of 7% from scheduled commercial banks, cooperative banks, and regional rural banks. To ensure that lending institutions remain financially viable while offering subsidized rates, the central government provides a 1.5% interest subvention to these institutions.
The real incentive, however, lies in the Prompt Repayment Incentive (PRI). Farmers who repay their loans on time are rewarded with an additional 3% interest concession, effectively bringing their net interest rate down to just 4% annually.
For farmers engaged in animal husbandry and fisheries, a similar benefit is extended for loans up to ₹2 lakh. This inclusion is particularly significant given the rising importance of allied agricultural sectors in rural income diversification.
Why It Matters for Farmers
The scheme not only makes credit more affordable but also encourages responsible financial behavior through repayment incentives. This significantly reduces dependency on informal and high-interest sources of finance such as moneylenders. Access to predictable and low-cost working capital improves farmers’ ability to invest in inputs, adopt new technologies, and improve yield outcomes.
Example: The Financial Advantage in Practice
To better illustrate the benefit: a farmer borrowing ₹1,00,000 under the KCC scheme for one year at the regular 7% interest rate would ordinarily pay ₹7,000 in interest. Under MISS, the interest burden is reduced to ₹4,000 for those repaying on time, thanks to the 1.5% subvention and 3% PRI. This results in a direct saving of ₹3,000 per ₹1 lakh borrowed, which can be significant for small and marginal farmers operating at low margins.
The Scale and Impact
There are currently over 7.75 crore (77.5 million) active KCC accounts across India. The volume of institutional credit through KCCs has expanded from ₹4.26 lakh crore in 2014 to ₹10.05 lakh crore by December 2024. Overall, the agricultural credit flow has more than tripled in the last decade, reaching ₹25.49 lakh crore in FY 2023–24. This highlights the central role MISS plays in sustaining rural credit channels.
Technology Integration for Better Governance
To improve transparency and operational efficiency, the government launched the Kisan Rin Portal (KRP) in August 2023. This digital platform streamlines interest subvention claims, reduces delays in credit processing, and allows real-time tracking, enhancing both accountability and farmer confidence.
Strategic Significance for Corporate Stakeholders
For corporations working in the rural ecosystem—whether in agri-inputs, farm equipment, fintech, or supply chain services—MISS creates a more credit-worthy and capital-accessible farmer base. The ability of farmers to invest in quality inputs, adopt sustainable technologies, or engage in contract farming arrangements is directly linked to their access to affordable credit. By enabling timely credit flow, the scheme reduces systemic risk and fosters a more commercially viable rural market.
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