This indicates a significant increase in the quantum of affordable working capital loans provided to farmers for agriculture and allied activities, the finance ministry said in a statement.
It is a reflection of credit deepening in agriculture and reduced dependency on non-institutional credit, the ministry added.
KCC is a banking product that provides farmers with timely and affordable credit for purchasing agricultural inputs such as seeds, fertilisers, 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 like animal husbandry, dairy and fisheries.
The government, under the Modified Interest Subvention Scheme (MISS), provides interest subvention of 1.5 per cent to banks for providing short-term agri loans through KCC up to Rs 3 lakh at a concessional interest rate of 7 per cent per annum. An additional Prompt Repayment Incentive of 3 per cent is provided to farmers on timely repayment of loans, which effectively reduces the interest rate to 4 per cent for farmers. Loans up to Rs 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, announced to increase in the loan limit under the Modified Interest Subvention Scheme from Rs 3 lakh to Rs 5 lakh, which would further benefit the farmers, it said.
Content Source: economictimes.indiatimes.com