Subvention and Solvency: PACS Performance under India's Interest Subvention Scheme in Vidisha

Abstract:-Interest subvention lowers the price of short-term crop credit for farmers, but it shifts a liquidity and margin burden onto the primary agricultural co-operative credit societies (PACS) that originate the loans. This study examines the effect of the Interest Subvention Scheme (ISS) on loan disbursement, profitability, share capital and recovery of PACS in Vidisha district, Madhya Pradesh, where prompt repayers borrow at an effective 0%. A mixed-methods design combines district records for 2019–20 to 2023–24, a survey of 500 farmer-borrowers and a structured survey of 8 PACS. Crop-loan disbursement increased by 134.2% (CAGR 23.7%) while fertiliser distribution rose 22.3%. Seven of eight societies reported higher disbursement, expanded share capital and improved recovery, six reported higher profit, and all eight identified delayed claim reimbursement as a structural weakness. Among farmers, 98.0% reported personal benefit and 75.0% rated the disbursement effect positive. The findings support the scheme's credit-deepening and discipline-building role but indicate that institutional solvency is conditional on the timeliness of reimbursement. Policy and research implications are discussed.

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