Kisan Credit Card (KCC)

The Kisan Credit Card (KCC) Scheme was introduced in 1998. 

KCC was introduced to enable the farmers to purchase agricultural input and draw cash for their production needs. In 2004, the scheme was further revised to cover long-term loans as well as the working capital load for agriculture and allied activities.

Further, the Reserve Bank of India has recently extended the KCC facility to farmers engaged in Animal Husbandry and Fisheries for their working capital requirements.

Aim of KCC

According to the Reserve Bank of India’s (RBI), 2019 Report of the Internal Working Group to Review Agricultural Credit, the card aims to “provide adequate and timely credit support from the banking system under a single window” for farmers’ “overall credit requirements such as the cultivation of crops, post-harvest expenses, marketing of produce, maintenance of farm assets, activities allied to agriculture and also consumption requirements of farmer households.”

Objective of Kisan Credit Card

Kisan Credit Card aims to provide credit support for the following needs:

• To meet the short-term credit requirement for cultivation
• to manage post-harvest expenses
• to meet the consumption requirement of farmer’s household
• working capital for maintaining the farm assets and activities allied to agriculture
• Investment credit requirement for agriculture allied activities

Implementing Agency of KCC

The scheme is implemented in the entire country with the help of a vast network of financial institutions’ credit frameworks involving:

• Commercial banks
• Regional Rural Banks (RRBs)
• Small Financial Banks, and
• Cooperative banks

The interest rate is fixed as per the RBI guidelines.

Who are eligible for KCC Benefits?

KCCS aid all types of farmers, but they are particularly beneficial to those who are categorized as marginal and small farmers (those with landholdings of up to 2 hectares), which make up more than 86% of farmers in India, according to the Agriculture Census 2015–16.

Simply, the eligibility extended to:

• Individual Farmers
• Joint Borrowers
• Tenant Farmers
• Oral lessees
• Sharecroppers
• Self Help Groups
• Joint Liability Group of Farmers

In reality, landless farmers rarely receive KCC.

According to the All India Rural Financial Inclusion Survey 2016–17, which is cited in the RBI’s 2019 report, “tenant farmers/share croppers/oral lessees/landless laborers face difficulty in accessing institutional credit in the absence of a proper legal framework and lack of records relating to their agricultural activity.”

Salient Features of Kisan Credit Card

The KCC plan offers a number of features, including an ATM-enabled RuPay Card, one-time documentation, built-in cost escalation in the limit, and any number of withdrawals within the limit.

The National Payments Corporation of India (NPCI) developed and introduced the RuPay. It was developed to satisfy the Reserve Bank of India’s demand for an open-loop, domestic, and multilateral payments system in India.

In 2004, the program’s eligibility was expanded to include farmers’ needs for investment credit for non-farm and related activities.

KCC provides for post-harvest expenses, produce marketing loans, household consumption needs for farmers, working capital for farm asset maintenance and related activities, and investment credit needs for agriculture and related activities.

Loan Tenure Under KCC Scheme

The maximum limit for a short-term agriculture loan is up to 1 year and for a long-term loan is 5 years. Moreover, banks can extend the tenure/duration of the loan at their discretion.

KCC Scheme Achievements So Far

The government has declared that as part of the Atmanirbhar Bharat Package, 2.5 crore farmers will be covered by the Kisan Credit Card (KCC) scheme with a credit boost of Rs. 2 lakh crores.

As a result, the milestone of covering more than 1.5 crore farmers under KCC has been accomplished in the direction of providing access to concessional credit by farmers, including Fishermen and Dairy producers.

Under the Kisan Credit Card (KCC) Scheme, marginal farmers have been given a flexible limit of Rs 10,000 to Rs 50,000 (as Flexi KCC) based on the amount of land owned and the crops grown, as well as post-harvest warehouse storage-related credit needs, other farm expenses, consumption needs, etc., plus small term loan investments without taking land value into account.

Interest Subvention Scheme and KCC

The Government of India is implementing the Interest Subvention Scheme to provide short-term Agri-loans to farmers at a concessional interest rate.

Under Interest Subvention Scheme, farmers involved in agriculture and other related activities are eligible for a short-term crop loan up to Rs. 3.00 lakh at a benchmark rate of 9%.

Along with this, an interest subvention (IS) of 2% and a Prompt Repayment Incentive (PRI) of 3% are also given to farmers on Short Term Agri Loan up to 3 lakh. Thus, the effective rate of interest comes down to 4% per annum.

Benefits of Interest Subvention Scheme

The sustainability of credit flows in the agricultural sector, as well as the financial health and viability of the lending institutions, particularly Regional Rural Banks & Cooperative Banks, will be ensured by an increase in interest subsidy. This will assure adequate farm credit in rural economies.

Banks will be able to bear the increase in funding costs and be encouraged to lend to farmers for short-term agricultural needs, allowing more farmers to benefit from agricultural credit.

Since short-term agri-loans are available for all activities, including animal husbandry, dairying, poultry farming, and fisheries, this will also result in the creation of employment.

Farmers will continue to be able to access short-term agricultural finance at an interest rate of 4% annually as long as they repay the loan on time.

Digitization of Kisan Credit Card

The Reserve Bank has decided to undertake pilot projects to digitize the Kisan Credit Card (KCC) in Madhya Pradesh and Tamil Nadu and expand it gradually. The step was taken in order to change the rural credit delivery system.

The proposed digitalization of the KCC loan process will increase its effectiveness, lower costs for borrowers, and significantly reduce turn-around-time (TAT).

Article Written By: Priti Raj