Cabinet extends interest relief on farm loans for 2025-26, retains 1.5% subsidy

The Union Cabinet has extended the Modified Interest Subvention Scheme for FY 2025-26, retaining a 1.5% subsidy on farm loans via Kisan Credit Cards, supporting rural credit access and aiding farmers with affordable borrowing.

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the continuation of the Modified Interest Subvention Scheme (MISS) for the financial year 2025-26. 

The scheme includes the Interest Subvention (IS) component, which will continue at the existing rate of 1.5%, ensuring affordable short-term credit to farmers through the Kisan Credit Card (KCC) system.

Modified Interest Subvention Scheme (MISS) is a Central Sector Scheme designed to make short-term institutional credit more accessible to farmers by offering interest relief. Under this scheme:

• Farmers can receive short-term KCC loans up to ₹3 lakh at a subsidized interest rate of 7%, with a 1.5% interest subvention offered to eligible lending institutions.
• Those who repay their loans on time can avail an additional Prompt Repayment Incentive (PRI) of up to 3%, reducing their effective interest rate to 4%.
• For loans taken exclusively for allied activities like animal husbandry and fisheries, the interest benefit is applicable on loans up to ₹2 lakh.
• No structural changes have been made to the scheme for the upcoming financial year.

At present, over 7.75 crore KCC accounts exist across the country. The Cabinet stressed the importance of continuing this support, as it plays a key role in ensuring the steady flow of institutional credit to agriculture. This, in turn, helps improve productivity and ensures financial inclusion for small and marginal farmers.

Key achievements in agriculture credit:

• Institutional credit disbursement through KCC rose from ₹4.26 lakh crore in 2014 to ₹10.05 lakh crore by December 2024.
• Overall agricultural credit flow grew significantly from ₹7.3 lakh crore in FY 2013-14 to ₹25.49 lakh crore in FY 2023-24.
• Reforms such as the launch of the Kisan Rin Portal (KRP) in August 2023 have increased transparency and efficiency in loan processing and claims.

Given the current interest rate trends, including median MCLR and repo rate movements, maintaining the 1.5% interest subvention is seen as vital for rural cooperative banks and to continue offering low-cost credit to India’s farming community.

The Cabinet underlined that this decision reaffirms the Government’s strong commitment to doubling farmers’ incomes, building a resilient rural credit ecosystem, and driving agricultural growth through affordable credit access.