Loan limit under Modified Interest Subvention Scheme increased from ₹3 lakh to ₹5 lakh in Union Budget 2025-26

 

The amount under operative Kisan Credit Card (KCC) accounts has more than doubled from ₹4.26 lakh crore in March 2014 to ₹10.05 lakh crore in December 2024. This indicates significant increase in quantum of affordable working capital loans provided to the farmers for agriculture and allied activities. This is reflection of credit deepening in agriculture and reduced dependency on non-institutional credit.

Kisan Credit Card (KCC) is a banking product that provides farmers with timely and affordable credit for purchasing agricultural inputs such as seeds, fertilizers, and pesticides, as well as for meeting cash requirements related to crop production and allied activities. In 2019, the KCC scheme was extended to cover the working capital requirements of allied activities, viz. Animal Husbandry, Dairy and Fisheries.

Government of India, under Modified Interest Subvention Scheme (MISS), provides interest subvention of 1.5% to banks for providing short-term agri loans through KCC up to Rs 3 lakh at a concessional interest rate of 7% per annum. An additional Prompt Repayment Incentive of 3% is provided to farmers on timely repayment of loans, which effectively reduces the rate of interest to 4% for farmers. Loans up to ₹2 lakh are extended on a collateral-free basis, ensuring hassle- free access to credit for small and marginal farmers.

The Finance Minister in Budget Speech 2025-26 has announced to increase the loan limit under the Modified Interest Subvention Scheme from ₹3 lakh to ₹5 lakh which would further benefit the farmers.

As of 31.12.2024, a total of ₹10.05 lakh crore has been given under operative KCCs benefitting 7.72 crore farmers.

Modified Interest Subvention Scheme increase expands concessional KCC loan limit, widening affordable credit access for farmers. Kisan Credit Card outstanding rose to Rs.10.05 lakh crore by December 2024, benefiting 7.72 crore farmers and extending institutional working capital to agriculture and allied activities. Under the Modified Interest Subvention Scheme banks get 1.5% subvention on short term KCC loans at a concessional 7% rate, with a 3% Prompt Repayment Incentive that effectively reduces the farmer's rate to 4%; collateral free lending is available up to the applicable threshold. The Union Budget 2025-26 increases the loan limit under MISS, expanding concessional and collateral free access for KCC borrowers.