Interest subvention scheme

Under the interest subvention scheme, the central government provides short term crop loan up to one year for a loan up to Rs. 3 lakhs. 

The Central government provides an interest subvention of 2 per cent for these short term crop loans. 

The RBI circular notes that interest subvention of 2 per cent will be calculated on the crop loan amount from the date of its disbursement/drawal up to the date of actual repayment of the crop loan by the farmer or up to the due date of the loan fixed by the banks whichever is earlier, subject to a maximum period of one year. 

For Farmers repaying the loan promptly an additional 2 per cent interest subvention is provided. This brings down the effective rate of short-term crop loans works out to be 4 per cent per annum.