Kisan Credit Card (KCC) Scheme

The Kisan Credit Scheme (KCC) was introduced in 1998, based on a model scheme devised by the National Bank for Agriculture and Rural Development (NABARD). Its purpose was to cater to the diverse credit needs of the agricultural sector by extending financial aid to farmers. The Kisan Credit Card scheme was instituted with the objective of streamlining the process through which farmers obtain sufficient and timely credit. This initiative aimed to assist farmers in procuring agricultural inputs such as seeds, fertilizers, and pesticides. Subsequently, in 2004, the scheme was expanded to encompass investment credit requirements for farmers involved in allied and non-farm activities.

In the fiscal year 2018-19, the government announced the expansion of the Kisan Credit Card (KCC) facility to encompass fisheries and animal husbandry farmers, thereby facilitating their working capital needs. The KCC provides coverage for post-harvest expenses, consumption requirements, and credit needs related to agricultural and allied activities. Implementation of the scheme falls under the purview of Commercial Banks, Regional Rural Banks (RRBs), Small finance banks, and cooperatives.

By availing themselves of the KCC scheme, farmers are relieved of the burden of high interest rates associated with loans offered by regular banks. The interest rates for KCC loans range from 2% to 4%. This lower interest rate facilitates more favorable loan repayment conditions for farmers, taking into account the crop’s harvesting period and the loan’s issuance date.

The KCC scheme brings forth a range of benefits and eligibility criteria. Let us explore the salient features of the Kisan Credit Card Scheme:

1. Farmers can fulfill their financial requirements, including expenses incurred during the post-harvest season.
2. Sanctioned loans of up to Rs. 3 lakh can be obtained, and produce marketing loans are also accessible.
3. Eligible farmers are provided with a savings account that offers affordable interest rates.
4. The scheme includes an ATM-enabled RuPay debit card, which streamlines documentation processes and incorporates built-in cost escalation in the credit limit. Additionally, it allows for multiple withdrawals within the set limit.
5. The KCC scheme ensures hassle-free disbursement procedures and offers flexible repayment options.
6. Loans up to Rs. 1.6 lakh do not require collateral.
7. Credit is available for a period of 3 years, and repayment can be made after the harvest season.
8. The government provides certain interest rate subsidies and schemes based on the cardholder’s repayment history and overall creditworthiness.
9. The issuing bank has the discretion to determine fees and charges such as processing fees and land mortgage deed charges.
10. The credit limit is determined based on factors such as operational land holding, cropping pattern, and scale of finance.
11. The Kisan Credit Card has a validity of 5 years, subject to an annual review. A good credit score may lead to an extension of the card’s limit to accommodate rising costs, incidental expenses, or changes in cropping patterns.
12. In the event of unforeseen circumstances, such as crop damage due to natural calamities, loans can be rescheduled or converted.

The eligibility criteria for the Kisan Credit Card Scheme encompass the following:

1. Individual farmers who are owners or cultivators.
2. Sharecroppers and tenant farmers.
3. Self-Help Groups comprising sharecroppers, farmers, and tenant farmers.
4. Farmers engaged in crop production and activities such as animal husbandry.
5. Fish farmers, fishers, SHGs (Self-Help Groups), JLGs (Joint Liability Groups), and women groups.
6. Fishermen who own registered boats or other fishing vessels and possess the necessary licenses or permissions for fishing in estuaries or the sea.
7. Poultry farmers and those involved in raising sheep, rabbits, goats, pigs, etc.
8. Dairy farmers, dairy SHGs, JLGs, and tenant farmers who own, lease, or rent sheds.

The KCC scheme includes financial provisions aimed at ensuring the availability of agricultural credit at a reasonable cost of 7% per annum for farmers. The Government of India implements an interest subvention scheme, providing a 2% interest subsidy for short-term crop loans up to Rs. 3 lakh. Additionally, the government offers a 2% interest subvention and a prompt repayment incentive of 3% to farmers.

The KCC scheme has achieved significant milestones. As of June 2020, approximately 25 lakh applications for the Nationwide Fishery KCC have been sanctioned. As part of the Atmanirbhar Bharat Package, the government has announced its commitment to cover 2.5 crore farmers under the Kisan Credit Card scheme, providing a credit boost of Rs. 2 lakh crores through a special saturation drive. The concerted efforts in this regard have resulted in surpassing the target of covering more than 1.5 crore farmers under the KCC, with a sanctioned credit limit of Rs. 1.35 lakh crore.

However, it is crucial to address the potential misuse of the KCC. Credit is sometimes redirected towards financially well-off individuals, and funds are diverted to non-agricultural purposes such as real estate investment, vehicle purchases, and higher education expenses for children in foreign countries. There are instances where the quantum of land is exaggerated to avail higher credit, and the KCC route is exploited for money laundering.

To mitigate these challenges, certain recommendations can be considered. It is imperative for all banks to adhere to KCC guidelines, providing proper acknowledgment of KCC applications and establishing a defined timeline for decision-making on these applications. Clear indications of the reasons for rejection should be given to enable field officers to rectify and resubmit the forms. Furthermore, the KCC should be extended to people from the Maldhari (Ghumantu) community, who do not have a fixed place of residence and lack collateral security to offer. The Maldharis, originally nomads who settled in the Junagadh district of Gujarat, India, should be eligible for the KCC. Additionally, the KCC should be made available to poor fishermen who are unable to provide collateral.

In conclusion, the Kisan Credit Scheme (KCC) has emerged as a significant initiative to address the credit requirements of the agriculture sector. Its provisions facilitate timely and accessible credit for farmers, leading to improved agricultural practices and economic growth. Nonetheless, measures need to be implemented to prevent misuse and ensure equitable distribution of credit among deserving beneficiaries.

More detailed it has been explained on PIB website