Escrow account mechanism under PMFBY operational from Kharif 2025; 20 states onboarded
Minister of State for Agriculture and Farmers Welfare Ramnath Thakur (File photo)
New Delhi, December 19: An escrow account mechanism mandating advance commitment of premium subsidy by states and Union territories under the Pradhan Mantri Fasal Bima Yojana (PMFBY) has been operationalised from the Kharif 2025 season, with 20 states already onboarded, the government informed Parliament on Friday.
In a written reply to the Rajya Sabha, Minister of State for Agriculture and Farmers Welfare Ramnath Thakur said the mechanism has been introduced under the revised PMFBY Operational Guidelines, 2023, to ensure timely availability of subsidy funds and smoother implementation of the crop insurance scheme.
Under the new framework, states and UTs are required to release 50 percent of their premium subsidy liability in advance for each season, based on the corresponding premium subsidy of the previous season. The funds are deposited into a dedicated escrow account maintained by the state or UT for each implementing insurance company.
The concerned insurance company is required to confirm receipt of the advance subsidy in the escrow account through the subsidy module of the National Crop Insurance Portal. Enrolment under PMFBY is opened only after such confirmation is received, ensuring financial discipline and reducing delays in policy issuance.
The escrow accounts are managed by the nodal state departments, including agriculture and horticulture departments, and are opened with scheduled commercial banks or cooperative banks, as decided by the respective states. The arrangement is governed through a multi-party agreement between the state department, the bank and the implementing insurance companies.
As of Kharif 2025, 20 of the 24 states implementing PMFBY have opened escrow accounts and are using them for deposit and disbursement of their share of the premium subsidy. The states and UTs yet to open escrow accounts are Andaman and Nicobar Islands, Manipur, Mizoram and Sikkim.
The government clarified that since the escrow mechanism has been operationalised only from the Kharif 2025 season, an impact analysis of the new system is not yet feasible.
The escrow-based subsidy mechanism is aimed at improving fund flow certainty, enhancing transparency and ensuring timely settlement of claims under the crop insurance scheme.
