Union Cabinet Extends Modified Interest Subvention Scheme for FY 26
Banking and Finance
5 min read
The Union Cabinet has approved the continuation of the Modified Interest Subvention Scheme for the fiscal year 2025-26. The decision was taken at a meeting of the Union Cabinet in New Delhi on 28 May 2025, which Prime Minister Narendra Modi chaired. Under the scheme, farmers are provided short-term crop loans and for allied agricultural activities at a subsidised rate.
The scheme had lapsed on 31 March 2025. The government made this decision just before the start of the Kharif cropping season.
About Modified Interest Subvention Scheme
Under the Modified Interest Subvention Scheme, farmers receive short-term crop loans and loans for allied agricultural activities like animal husbandry, beekeeping, fisheries, etc., through the Kisan Credit Card (Card) at a subsidised fixed rate of interest..
However, the scheme's benefits will be available only to farmers whose loan accounts have been linked with Aadhaar.
Features
- Interest subvention will be provided on loans up to Rs 3 lakhs on short-term crop loans.
- The loan limit is Rs 2 lakhs for farmers engaged only in allied agricultural activities like animal husbandry, etc.
- Loans will be provided to the farmers at a concessional rate of 7 % per annum.
Prompt repayment incentive
- If farmers repay their loans on time, they will receive a 3% interest subvention, which means they will pay only 4% on their loans.
- The farmer has to repay the loan one year from the date of availing the loan.
Interest Subvention to lending institutions
The eligible lending institution for farmers under the Modified Interest Subvention Scheme will be provided a 1.5% interest subvention.
The eligible financial institutions are ;
- Public Sector Banks,
- Private Sector Banks ( loans provided by their rural and semi-urban branches),
- Small Finance Banks (SFBs), and
- Computerised Primary Agriculture Cooperative Societies (PACS) ceded to Scheduled Commercial Banks (SCBs), using their resources to lend to farmers.
Allocation for 2025-26
- The Government of India has allocated Rs 15,642 crore for the Modified Interest Subvention Scheme.
Modified Interest Subvention Scheme and Union Budget 2025-26
In her 2025-26 budget speech, Union Finance Minister Nirmala Sitharaman had announced an increase in the loan amount from Rs 3 lakhs to Rs 5 lakhs under the Modified Interest Subvention Scheme.
It seems that the government has decided not to increase the loan amount to Rs 5 lakhs as announced in the budget.
About Kisan Credit Cards
- Kisan Credit Card (KCC) was introduced in India by NABARD (National Bank for Agriculture and Rural Development) in 1998 to provide cheap loans to farmers for agricultural and allied activities.
- Loans are provided to the farmers to meet their agricultural and allied activities needs.
- According to the Union Ministry of Finance, the loan amount sanctioned under the KCC was Rs 10.05 lakh crore on 31 December 2024.
- The overall loans to the agricultural sector by the institutional lenders have increased from Rs 7.3 lakh crores in 2013-14 to Rs 25.49 lakh crores in 2023-24.
For details about KCC, read
Kisan Credit Card loans cross Rs 10 lakh crore in the country
