Modified Interest Subvention Scheme 2026: 4% Crop Loan
Modified Interest Subvention Scheme explained: 7% KCC crop loans, 3% prompt repayment incentive, the ₹3 lakh vs ₹5 lakh limit, and why farmers lose it.
In this article
The Modified Interest Subvention Scheme (MISS) is the reason a Kisan Credit Card crop loan costs 7% instead of a bank's normal 9% to 12%. The government pays the bank 1.5% a year on short-term farm loans, and pays farmers who repay on time a further 3% Prompt Repayment Incentive (PRI), so a punctual borrower effectively pays 4%. The benefit is available only on loans taken through a KCC and only up to the scheme limit.
All terms below are as of October 2026. If you do not yet have a KCC, read our Kisan Credit Card loan guide first.
Status in 2026: is the scheme open?
The scheme is running. The Union Cabinet approved its continuation for 2025-26 in May 2025 with the 1.5% subvention unchanged. For 2026-27, the Union Budget allocated ₹22,600 crore, the same as the previous year. In March 2026 the Finance Ministry allowed MISS, along with other agriculture schemes, to continue on the same terms while their appraisal for the 16th Finance Commission cycle (2026-31) is completed. Banks continue to lend at 7% under it.
How the scheme works
| Component | Who gets it | Rate (October 2026) |
|---|---|---|
| Interest subvention (IS) | Lending bank, RRB or co-operative | 1.5% a year |
| Prompt Repayment Incentive (PRI) | Farmer, if repaid on time | 3% a year |
| Rate charged to farmer | Farmer | 7% a year |
| Effective rate for prompt payers | Farmer | 4% a year |
Eligible lenders are public and private sector banks, small finance banks, Regional Rural Banks and co-operative banks. Claims are processed through the government's Kisan Rin Portal, which links each loan to the farmer's Aadhaar.
What loans are covered
- Short-term crop loans through a KCC: seeds, fertiliser, labour, irrigation and other seasonal costs, up to ₹3 lakh.
- Allied activities through a KCC: dairy, poultry, fisheries and similar. Where the loan is only for animal husbandry or fisheries, the benefit applies up to ₹2 lakh.
- Post-harvest loans against negotiable warehouse receipts for small and marginal farmers with a KCC, for up to six months after harvest, under scheme guidelines meant to prevent distress sale. Ask your bank whether it offers this.
- Restructured loans after a natural calamity, which continue to get the subvention on the restructured amount for the first year, and for longer in severe calamities as the government decides.
Not covered: long-term investment loans (tractors, land development), crop loans that are not routed through a KCC, and the part of any loan above the scheme limit.
The ₹3 lakh vs ₹5 lakh question
The Union Budget 2025-26 announced that the loan limit under MISS would rise from ₹3 lakh to ₹5 lakh for KCC loans. A March 2026 PIB backgrounder says the limit has been enhanced, and the Expenditure Finance Committee approved the change. Yet the same note still describes 7% loans "up to ₹3 lakh", and banks have not all implemented it in the same way. Practical approach: if your KCC limit is above ₹3 lakh, ask the branch in writing which rate applies on the ₹3 lakh to ₹5 lakh portion, and keep the reply.
Worked example: what the scheme saves
Illustrative. Meena has a KCC and draws a short-term crop loan for one year. Assume the bank's normal agricultural rate for borrowing outside the scheme is 9%.
Case A: ₹3,00,000, repaid on time
- Interest at 7%: ₹3,00,000 × 7% = ₹21,000
- PRI at 3%: ₹3,00,000 × 3% = ₹9,000
- Net cost: ₹12,000 (4%)
Case B: ₹3,00,000, repaid late
- Interest at 7% = ₹21,000; no PRI
- Net cost: ₹21,000, plus any penal interest on the overdue period
- Lost by paying late: ₹9,000
Case C: ₹4,50,000, repaid on time
| Scenario | Calculation | Interest for 1 year |
|---|---|---|
| Only ₹3 lakh under MISS, rest at 9% | ₹12,000 + (₹1,50,000 × 9% = ₹13,500) | ₹25,500 |
| Whole ₹4.5 lakh under the ₹5 lakh limit | ₹4,50,000 × 4% | ₹18,000 |
The gap between the two readings is ₹7,500 for one year, which is why it is worth getting the bank's answer in writing. For instalment-based farm term loans outside the scheme, compare repayment schedules with the EMI calculator.
Eligibility checklist
- You are a farmer (owner, tenant, oral lessee or sharecropper), or an SHG or JLG of farmers, with a KCC from an eligible lender.
- The loan is short-term and used for crop or allied activities.
- Your Aadhaar is linked to the KCC account, since claims are tracked by Aadhaar on the Kisan Rin Portal.
- For PRI, the loan is repaid by the due date. The due date follows your crop season and cannot be more than one year from the date of disbursement.
How to get the benefit, step by step
- Open or renew a KCC at your bank branch. The interest subvention is applied automatically to eligible short-term drawals; there is no separate application form.
- Check your sanction letter shows the loan as a KCC crop or allied loan, and note the due date.
- Seed Aadhaar with the account and keep land and crop details updated at renewal.
- Draw only what you need. KCC interest is charged on the amount used and for the days used.
- Repay before the due date. Even a few days late means losing the 3% PRI on the whole loan for that season.
- Check the credit. Some banks charge 7% and credit the 3% later; others charge 4% directly. Look for the PRI credit in your passbook or statement.
Why farmers lose the benefit
- Repaying after the due date, the most common reason. A rollover done only on paper, without actual repayment, can also be treated as overdue.
- Loan not under KCC, for example an ordinary gold loan marked "agriculture". See agriculture gold loan for why the KCC route matters.
- Aadhaar not linked or mismatched with land records.
- Funds used for non-farm purposes, which lets the bank reclassify the loan and recover the subvention.
- Borrowing above the limit, where the excess is charged at the bank's normal rate.
How to complain
If your PRI is not credited or the bank charged more than 7% on an eligible loan:
- Write to the branch with your KCC account number, loan date, repayment date and amount, and ask for the PRI credit or the reason for refusal.
- If there is no reply in 30 days, escalate to the bank's grievance redressal or nodal officer.
- Then file with the RBI Integrated Ombudsman at cms.rbi.org.in. Our guide on what to do when the bank does not resolve a complaint has the steps.
Be wary of anyone offering to "get your interest subsidy released" for a fee. The subvention is claimed by the bank from the government; the farmer never pays to receive it.
Key takeaways
- MISS lets KCC holders borrow short-term at 7%, with a 3% bonus for on-time repayment, for an effective 4%.
- The bank receives 1.5%; the farmer receives the 3% PRI only if the loan is repaid by the due date.
- The benefit has applied up to ₹3 lakh (₹2 lakh for animal husbandry or fisheries only); a ₹5 lakh limit has been announced, so confirm with your bank.
- The scheme is running in 2026-27 with a ₹22,600 crore budget, on existing terms pending 2026-31 approval.
- Paying a few days late can cost thousands of rupees in lost incentive.
Frequently asked questions
What is the Modified Interest Subvention Scheme?
It is a central government scheme that lets farmers take short-term crop and allied loans through a Kisan Credit Card at 7% a year. The government pays banks 1.5% to make that rate possible, and pays farmers who repay on time a further 3%, so their effective rate is 4%.
What is the loan limit under the interest subvention scheme?
The benefit has applied to short-term KCC loans up to ₹3 lakh, and up to ₹2 lakh for loans taken only for animal husbandry or fisheries. The Union Budget 2025-26 announced an increase to ₹5 lakh and a 2026 PIB note says it has been enhanced, but confirm with your bank how the part above ₹3 lakh is priced.
How do I get the 3% prompt repayment incentive?
Repay the crop loan, with interest, on or before the due date fixed by the bank, which is linked to your crop season and is at most one year from disbursement. The bank claims the incentive from the government and credits it to your account, or charges the net 4% directly.
Does a gold loan for farming get the interest subvention?
Only if it is a short-term crop loan sanctioned through a Kisan Credit Card and used for farming. Agricultural gold loans outside a KCC do not get the subvention.
Is the interest subvention scheme continuing in 2026-27?
Yes, as of October 2026. The Union Budget 2026-27 allocated ₹22,600 crore to it, and the Finance Ministry allowed the scheme to continue on its existing terms while approval for the 2026-31 cycle is completed.
This article is for general education and is not personalised financial, tax or legal advice. Rates and rules are as of 25 Oct 2026; confirm current terms with your lender, AMC or a qualified adviser.
