The Union Cabinet on Wednesday approved the continuation of the Modified Interest Subvention Scheme (MISS) for the financial year 2025–26. The scheme will retain the existing 1.5% interest subvention offered to eligible lending institutions, ensuring that short-term agricultural loans remain affordable and accessible to farmers across the country.
The Modified Interest Subvention Scheme is a Central Sector Scheme aimed at making short-term credit available to farmers at a reduced interest rate through the Kisan Credit Card (KCC) system. Under the scheme, farmers can avail loans of up to ₹3 lakh at a standard interest rate of 7%. A 1.5% interest subvention is provided to lending institutions, effectively reducing the lending burden. Furthermore, farmers who repay their loans promptly receive an additional incentive of up to 3% as a Prompt Repayment Incentive (PRI), bringing down the effective interest rate to just 4%. For loans taken specifically for animal husbandry or fisheries, the interest benefit is available for amounts up to ₹2 lakh.
No changes have been introduced in the structure or other operational aspects of the scheme for the upcoming financial year.
As of now, there are more than 7.75 crore active Kisan Credit Card accounts in India. The continued implementation of MISS is expected to play a crucial role in sustaining the flow of institutional credit to the agriculture sector, particularly benefiting small and marginal farmers. This support is vital for enhancing farm productivity and ensuring financial inclusion in rural areas.
In recent years, India has witnessed significant growth in agricultural credit. Institutional credit disbursed through KCC increased from ₹4.26 lakh crore in 2014 to ₹10.05 lakh crore by December 2024. Overall agricultural credit flow also rose substantially, from ₹7.3 lakh crore in the financial year 2013–14 to ₹25.49 lakh crore in 2023–24.
In addition to credit expansion, digital reforms have improved efficiency and transparency in the credit system. The launch of the Kisan Rin Portal (KRP) in August 2023 has streamlined the claim processing mechanism under the scheme, reducing delays and promoting accountability in interest subvention disbursements.
Given the current lending cost environment, including trends in the Marginal Cost of Funds based Lending Rate (MCLR) and repo rate movements, maintaining the 1.5% interest subvention is considered essential. This will help rural and cooperative banks continue providing low-cost loans, enabling farmers to access timely credit without additional financial pressure.