NEW DELHI: The government is likely to make an outlay of Rs 21,000 crore for reduce the cost of short-term loans for Kisan Credit Cards (KCCs) holders in the forthcoming interim budget for 2024-25. This amounts to an annual rise of 13%.
Sources said that under modified interest subvention scheme (MISS) of the agriculture ministry, against a revised budgetary allocation of Rs 18,500 crore for the current fiscal, around Rs 12,859 crore was disbursed till the beginning of January.
“A higher allocation under the interest subvention scheme is expected in the next fiscal,” an official said adding in the current fiscal expenditure is likely to match the revised estimate of the scheme.
In FY23, actual expenditure under the scheme was Rs 17,997 crore against the revised estimate of Rs 19,700 crore.
The official said lower allocation under interest subvention was because of compulsory budget allocation of 10% towards north-eastern states, where farm credit flow has been low.
Under modified interest subvention scheme of the department of agriculture, farmers holding KCCs are provided loans upto Rs 3,00,000 at 7% per annum for meeting their working capital requirement for farmers for crop production. In the case of a short-term loan availed only for allied activities for allied sectors such as animal husbandry and dairying, the interest subvention is Rs 2,00,000 per KCC holders.
An additional 3% interest subvention is provided to farmers for prompt and timely repayment of loans thus reducing the effective rate of interest to only 4% per annum for KCC card holders.
Currently, out of 73.6 million KCC holders, 23.7 million belong to agri-allied sectors. Officials said that the short term crop loans are used for pre-harvest activities such as weeding, sorting, harvesting, and transporting activities by the farmers besides purchase of agricultural inputs – seeds, fertilisers, or pesticides.
Under the scheme, financial institutions such as public sector banks, regional rural banks (RRBs), or cooperative banks are provided with 1.5% interest subvention during FY23 to FY25.
Officials said that RRBs and cooperative banks are provided refinancing facilities under the scheme.
To protect KCC card holders farmers against distress sales, the benefit of interest subvention is available for post-harvest loans against negotiable warehouse receipts for six months.
For farmers impacted by severe natural calamities, interest subvention and prompt repayment incentive on restructured crop loans is also given for five years.
This is based on the report of the inter-ministerial central team for grant of national disaster relief fund assistance.
To eliminate duplicity of the KCC loan accounts under the subvention scheme, Aadhar authentication of farmers has been made mandatory since 2019-20.
Source: The Financial Express
