Farmer denied Central govt subsidy on dairy loan: Federal Bank ordered to pay Rs 1.7 lakh; court says bank failed to give NABARD the claim details for nearly seven years

A Kerala consumer commission has ordered Federal Bank to pay Rs 1.76 lakh to a dairy farmer from Kannur after finding that the bank's own procedural failures prevented him from receiving a government subsidy he was fully eligible for under a central scheme designed to support livestock farmers.

The order, passed on 17 July 2026 by the District Consumer Disputes Redressal Commission, Kannur, carries a pointed finding: the farmer did not lose the subsidy because funds were unavailable. He lost it because his bank did not do its job.

How it started: a government scheme, a loan, and a promise


In 2017, the Central Government announced a scheme through NABARD called the Dairy Entrepreneurship Development Scheme, or DEDS, which offered farmers a 25 per cent capital subsidy on loans taken for dairy activities, with no collateral required. The scheme was aimed at encouraging small farmers to set up or expand dairy operations.

James Thomas, a farmer from Kamballur in Kasaragod, read about the scheme in a newspaper and approached his branch of Federal Bank in Cherupuzha, Kannur, where he already had an existing relationship. The bank sanctioned him an agricultural loan of Rs 3.75 lakh in December 2017, disbursed in February 2018, specifically for purchasing five cows and building a cowshed. Crucially, the bank represented to him that a 25 per cent NABARD subsidy would come along with the loan, amounting to Rs 1,26,500.

Thomas used the loan as intended. He bought the cows, built the cowshed, and began repaying the loan from his dairy income. But the subsidy never came.

Years of waiting, years of being told to wait

Every time Thomas approached the bank asking about the subsidy, he was told it had not yet been received. Then the bank told him the NABARD funds had been exhausted. He escalated the complaint to the bank's vice-president and zonal head. He received no reply.

When he checked the NABARD website himself, he found something that contradicted what the bank had been telling him: NABARD had released all subsidy amounts due up to 2020 to participating banks.

He filed a complaint with the consumer commission in 2024.

What the bank said, and what the documents showed

Federal Bank's defence rested on a straightforward argument: it had submitted the subsidy claim to NABARD on 15 February 2018, the same day the loan was disbursed, and was told by NABARD to resubmit the application through a new online portal called ENSURE. When it tried to do so, the bank said, the budget allocated for Kerala had already been exhausted. It submitted another application in May 2019, which was also rejected. The bank argued it had done everything it could and that there was no deficiency on its part.

The commission examined the documents carefully and found a different picture.

The ENSURE portal, the commission noted, had been operational since 5 September 2017, more than three months before the bank even sanctioned Thomas's loan in December 2017. This meant the bank was aware of the new system when it processed his loan but still filed the initial subsidy claim through the old paper-based method in February 2018. NABARD returned that application and directed the bank to use the portal. The commission found this initial filing error was entirely the bank's fault.

On the bank's claim that it resubmitted through the portal in May 2019, the commission found no documentary evidence to support it. The bank produced no records, no acknowledgement, no rejection notice from NABARD to back that claim.

The document that sealed the case

The most damaging piece of evidence was a letter dated 14 July 2025 from NABARD itself, filed by Thomas as part of his documents. In that letter, NABARD told Thomas that it had taken up the issue with Federal Bank and had asked the bank for details of its claim submission on the portal. As of that date, NABARD was still waiting for a response from the bank.

What the commission declared

The commission's finding on this point is direct and significant. It held that Thomas was eligible for the DEDS subsidy of Rs 1,26,500 and was denied it solely due to the bank's lapses. A bank that promises a government benefit as part of a loan and then fails to take the procedural steps necessary to secure that benefit for its customer is guilty of deficiency in service. The commission also rejected the bank's limitation argument, noting that the cause of action was a continuing one, with the most recent communication from NABARD dated as recently as July 2025.

What the court ordered

The commission directed Federal Bank to pay Rs 1,26,500 as the subsidy amount Thomas was entitled to, along with Rs 50,000 as compensation for mental agony and hardship. The total comes to Rs 1,76,500.

The bank has been given one month from the date of receiving the certified copy of the order to comply. If it fails to do so, the entire awarded amount will carry interest at 12 per cent per annum from the date of the order until full payment is made.

Check the case judgement here: