Modified Interest Subvention Scheme (MISS) for 2025–26 continues the concessional short‑term credit support to farmers through Kisan Credit Cards (KCC) for agriculture and allied activities, with no fundamental change in structure vis‑à‑vis earlier years. It aims to ensure assured, affordable and timely working capital to cultivators while incentivising prompt repayment and supporting the viability of lending institutions.
Policy background and objectives
MISS is a Central Sector scheme of the Government of India, implemented through eligible lending institutions and anchored on the Kisan Credit Card platform. The core objective is to make short‑term crop and allied activity loans available at a concessional interest rate by routing budgetary interest subvention to banks rather than direct rate caps alone.
Key objectives include:
- Ensuring uninterrupted availability of working capital for crop production and allied activities like dairy, animal husbandry and fisheries.
- Reducing dependence on informal credit and strengthening the formal rural credit delivery system via KCC.
- Encouraging a culture of prompt repayment through an explicit Prompt Repayment Incentive (PRI), thereby improving asset quality in agricultural portfolios.
Coverage and eligible activities in FY 2025–26
For 2025–26, the Union Cabinet has approved the continuation of MISS for short‑term loans availed through KCC for agriculture and allied activities, with the existing coverage parameters broadly maintained. The scheme continues to operate as a 100% centrally funded intervention under the Ministry of Agriculture & Farmers Welfare in coordination with the Department of Financial Services and the Reserve Bank of India.
Eligible coverage includes:
- Short‑term crop loans for cultivation requirements (seeds, fertilizers, pesticides, labour, etc.) routed through KCC.
- Short‑term working capital for allied activities such as dairy, animal husbandry, fisheries and related operations, generally within the overall KCC limit.
- Individual farmers holding KCCs, including small and marginal farmers, tenant farmers and sharecroppers, as per extant KCC guidelines of lending institutions.
Financial parameters and interest structure
Under MISS for FY 2025–26, farmers can avail eligible short‑term loans up to a prescribed ceiling at a base concessional rate of 7% per annum, out of which a portion is supported through interest subvention to banks. The scheme also retains a Prompt Repayment Incentive which effectively reduces the interest cost for borrowers who service their dues on time.
Salient financial features are:
- Short‑term loans up to ₹3 lakh per farmer through KCC are eligible under MISS at a concessional interest rate of 7% per annum.
- An interest subvention of 1.5% per annum is provided to eligible lending institutions on such short‑term loans, thereby partially compensating them for lending at the concessional rate.
- Farmers who repay their loans promptly within the prescribed due dates receive up to 3% Prompt Repayment Incentive, reducing their effective interest rate to around 4% per annum on KCC loans falling under MISS.
These parameters seek to balance three objectives: maintaining concessional end‑borrower pricing, protecting bank spreads, and embedding behavioural incentives for timely repayment.
Institutional framework and eligible lenders
MISS is implemented through a wide set of institutions to ensure deep penetration of credit in rural and semi‑urban geographies. The scheme is closely linked to KCC operations, which already provide a standardized framework for assessment, documentation and monitoring of short‑term agri credit.
Eligible institutions typically include:
- Public Sector Banks and Private Sector Banks, particularly rural and semi‑urban branches handling agricultural portfolios.
- Regional Rural Banks (RRBs), Small Finance Banks, and Cooperative credit structures like computerized Primary Agricultural Credit Societies (PACS) ceded with Scheduled Commercial Banks, wherever aligned with KCC issuance.
- These entities lodge claims for interest subvention and PRI through designated digital platforms, increasingly integrated with systems like the Kisan Rin Portal to improve transparency and timeliness.
Operational mechanics and claim settlement
Operationally, MISS functions by allowing banks to lend at the notified concessional rate while being reimbursed a portion of the interest income foregone through budgetary support. Robust back‑end processing has become critical given the scale of KCC outreach and the volume of short‑term agri credit now being handled annually.
Broad operational features:
- Banks calibrate KCC limits based on cropping pattern, scale of finance, allied activities and local conditions, marking eligible short‑term components for interest subvention treatment.
- Periodic claims for 1.5% interest subvention and for Prompt Repayment Incentive are submitted as per guidelines issued by the Government of India and the Reserve Bank of India, increasingly via online, portal‑based workflows.
- Verification, reconciliation and settlement of claims follow specified audit and certification processes to minimize leakages and ensure that fiscal support translates into effective rate relief at the farmer level.
Significance for agricultural credit and policy
MISS for FY 2025–26 continues to position KCC‑based short‑term credit as the backbone of India’s institutional agricultural finance architecture. By combining concessional pricing with scale, the scheme has contributed to substantial growth in both the KCC portfolio and overall agricultural credit over the past decade.
Policy significance includes:
- Strengthening financial inclusion by keeping formal credit competitive vis‑à‑vis informal sources for millions of small and marginal farmers.
- Supporting stability of agricultural lending by improving repayment behaviour and sustaining asset quality through the PRI mechanism.
- Aligning with broader digital and governance reforms in agri credit, including portals for credit flow tracking and subsidy management, thereby enhancing transparency and data‑driven policy making.
For a banking audience, MISS in 2025–26 thus represents continuity with refinement: preserving the core architecture of KCC‑linked short‑term credit at concessional rates, while deepening digital integration and reinforcing incentives for prudential credit culture in the agriculture and allied sectors.
