Pradhan Mantri Fasal Bima Yojana
Also written PMFBY
A crop insurance scheme that pays farmers based on the gap between a threshold yield and the actual yield, compulsory for farmers who have taken institutional loans.
In plain language
Farming income depends on the weather, on pests, and on a dozen things a farmer cannot control. Pradhan Mantri Fasal Bima Yojana exists to soften the financial blow when a crop fails.
The workbook calls it a crop insurance scheme aimed at shielding farmers from crop failure through insurance. What triggers a payout is not simply a bad year in general — it is a specific comparison: in the event of a crop loss, the farmer is paid based on the difference between the threshold yield and the actual yield.
And it is not always optional: the scheme is compulsory for farmers who have availed of institutional loans.
How it works
Three mechanics matter here, each with the workbook's own wording:
- The payout formula is yield-based. The farmer is paid based on the difference between the threshold yield and the actual yield. The threshold yield is calculated based on the average yield for the last seven years, and the extent of compensation is set according to the degree of risk for the notified crop.
- It covers a wide range of external risks: droughts, dry spells, floods, inundation, pests and diseases, landslides, natural fire and lightning, hailstorms, cyclones, typhoons, tempests, hurricanes and tornadoes.
- Post-harvest losses are covered too, but only for a limited window — the scheme covers post-harvest losses up to a period of 14 days.
The scheme is compulsory for farmers who have availed of institutional loans, unlike the other government schemes in this chapter, which are voluntary.
A worked example
A farmer growing a notified crop has a seven-year average (threshold) yield of 20 quintals per acre. A severe hailstorm this season, one of the risks the scheme explicitly covers, brings his actual yield down to 12 quintals per acre.
Because the payout under PMFBY is based on the gap between the threshold yield and the actual yield, and the shortfall here is 8 quintals per acre against the threshold, he receives compensation calculated on that difference — the exact size depends on the degree of risk set for his notified crop, which the workbook does not itself quantify.
Had he taken an institutional loan to fund this season's sowing, enrolling in PMFBY would not have been his choice to make — the workbook states the scheme is compulsory for farmers who have availed of institutional loans.
Why NISM asks about it
Chapter 9 (Government Schemes for Various Savings and Investment Options) covers PMFBY last among the named insurance schemes, with the most mechanical detail of the five: the seven-year threshold-yield formula, the list of covered perils, and the 14-day post-harvest window. Expect the exam to test the seven-year figure and the 14-day figure specifically.
Common exam traps
- The threshold yield is the average of the last seven years — a candidate who answers five years or ten years has the wrong figure.
- Post-harvest losses are covered only up to 14 days — beyond that window, this scheme's post-harvest cover does not apply.
- PMFBY is compulsory for farmers with institutional loans — unlike PMSBY, PMJJBY and PMJAY, which this chapter does not describe as compulsory.
- The payout depends on the gap between threshold and actual yield, not on the farmer's own input costs or losses in rupees.
Check yourself
1.Under Pradhan Mantri Fasal Bima Yojana, how is the threshold yield calculated and for how long are post-harvest losses covered?
- a)Average yield of the last three years; post-harvest losses are not covered
- b)Average yield of the last seven years; post-harvest losses are covered up to 14 days
- c)The previous year's yield; post-harvest losses are covered up to 30 days
- d)The district average yield; post-harvest losses are covered up to 7 days
Show the answer
Answer: (b) Average yield of the last seven years; post-harvest losses are covered up to 14 days
"In the event of a crop loss, the farmer will be paid based on the DIFFERENCE BETWEEN THE THRESHOLD YIELD AND THE ACTUAL YIELD. The THRESHOLD YIELD IS CALCULATED BASED ON AVERAGE YIELD FOR THE LAST SEVEN YEARS and the extent of compensation is set according to the DEGREE OF RISK for the notified crop." And: "Scheme covers POST-HARVEST LOSSES UP TO A PERIOD OF 14 DAYS." Seven years of history is what makes "a bad harvest" measurable rather than arguable, and the fourteen-day window covers exactly the period between cutting and transport when hail and unseasonal rain destroy what survived the season. Two further facts are examinable: "the scheme is COMPULSORY for farmers who have availed of INSTITUTIONAL LOANS" — so a farmer with a bank or cooperative crop loan is already insured — and the peril list runs "droughts, dry spells, floods, inundation, pests and diseases, landslides, natural fire and lightning, hailstorms, cyclones, typhoons, tempests, hurricanes and tornadoes."
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- Pradhan Mantri Jeevan Jyoti Bima YojanaA government life insurance scheme for bank account holders aged 18 to 50, with a fixed annual premium auto-debited from one savings account.
- Pradhan Mantri Suraksha Bima YojanaA government accidental insurance scheme for bank account holders aged 18 to 70, with a fixed annual premium auto-debited from one savings account.