CHAPTER- 3

KISAN CREDIT CARD SCHEME

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3.1 INTRODUCTION

The Kisan Credit Card Scheme is a land mark in the history of rural credit in India.
The mechanism of credit card has been one of the key products developed to expand the
outreach of banks and simplify the credit delivery system.

The Kisan Credit Card (KCC) is a scheme which is offered by the Government of
India to the farmers with an aim to fulfill their short-term financial needs and specific credit
requirements. The KCC scheme was launched in 1998 and was prepared by NABARD
(National Bank for Agriculture and Rural Development). It was introduced to provide
short-term credit and term loans to the farmer, who can readily purchase different
agriculture inputs such as seeds, fertilizers, pesticides and draw cash for their immediate
production needs.

The KCC is available through all the Indian banks, regional rural banks and co-
operative banks. This scheme was further revised in 2012, with an aim to simplify the
process and facilitate an issuance of ‘Electronic Kisan Credit Cards’. It has a simple
documentation and credit-delivery process for the farmers who are generally not aware of
banking procedures and formalities.

Through the KCC scheme, farmers are exempted from the high interest rates of the
loans offered by regular banks. The interest rates for KCC are between 2%-4%. This low
interest rate helps farmers in repaying loans better, of course taking into account the
harvesting period of the crop and the date at which the loan was granted.

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’

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“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.”

3.2 KCC LOAN OR CROP LOAN

A crop loan can be defined as a loan given for meeting farmers’ various agricultural needs.
Generally, farmers need credit for the continuation of cultivation activity. A farmer is
primarily given loans for two purposes such as crop loan and term loan.

Loans offered under the Kisan Credit Card Scheme or KCC loan is revolving cash credit in
nature. This means this crop loan offers the flexibility of any number of withdrawals and
repayment within the limit.

This facility provides flexibility to a farmer in withdrawing loan as per his convenience and
repayment at the reduced interest cost. This ensures that the farmer’s profitability increases.

Most of the Indian village population primarily depend on earning from agricultural
operations. The agriculture sector is one of the important sources for earning bread and
butter for them.

But a few years ago there were hardly any commercial credit institutions who were very
much interested in offering credit to the farmers. This caused hardships to the farmers who
could not afford credit facilities extended by the Mahajans or Locant Jamindars.

So, the Kisan Credit Card Scheme came as a boon to the farmers. This loan facility has
made the farmers believe in themselves and uplifted their socio-economic conditions.

Their credit requirements can be classified as following three terms such as:

1. Short-Term Credit (Up to Fifteen months):

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For meeting cultivation activities such as buying seeds, planting seeds, fertilizers,
pesticides, bullocks, arranging water resources and etc.

Generally, this short-term credit is repaid within the next agricultural produce such as credit
taken for Rabi crop and repaid after selling Kharif crop and vice-versa. This credit is
generally extended by co-operative societies and commercial banks.

2. Medium-Term Credit (From 15 months to 5 years):

For buying agricultural implements, buying cattle, making water resources. This loan is
repaid within the span of fifteen months to five years. This credit is generally given by co-
operative societies and commercial banks.

3. Long-Term Credit (More than 5 years):

Long term credit is taken for land improvement, digging of wells, pump set installation and
buying of tractors and harvesters.

This credit is generally given for a period of more than 5 years. Long term credit is given
by the Primary Co-operative Agricultural and Rural Development Banks (ARDBS).

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3.3 OBJECTIVES/ PURPOSE OF KCC SCHEME

Kisan Credit Card (KCC) scheme meets the financial requirements of farmers at various
stages of farming. The scheme aims at providing adequate and timely credit support from
the banking system under a single window with flexible and simplified procedure to the
farmers for their cultivation and other needs as indicated below:

 To meet the short-term credit requirements for cultivation of crops;

 Post-harvest expenses;

 Produce marketing loan;

 Consumption requirements of farmer household;

 Working capital for maintenance of farm assets and activities allied to agriculture;

 Investment credit requirement for agriculture and allied activities.

3.4 FEATURES OF KCC SCHEME

 Provides adequate and timely credit provision to the farmers under a single window.

 Flexible and simplified procedure with simple documentation process.

 The KCC is valid for five years.

 Rupay debit card for all KCC borrowers, which is used to withdraw cash from
automated teller machines (ATMs).

 RuPay is an Indian plastic card launched by the National Payments Corporation of

India (NPCI), which facilitates digital payment at all Indian banks and financial
institutions.

 The KCC can be utilized either to make cash withdrawals or to take loans.

 Farmers with good repayment history receive a higher credit limit.

 The repayment period is based on the crop period which can be either short or long,
and marketing period for the crop.

 Allows rescheduling of repayment if the crops get damaged due to any natural
calamity such as flood or fire.

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  Provides coverage for accidental death and disability up to INR 50,000 against
death, disability or loss of limbs or eyes.

 No collateral is required up to a loan of INR 1.60 lakh and up to INR 3 lakh, in case
of tie up arrangement.

 The KCC has to be issued within 14 days from the receipt of completed application.

3.5 BENEFITS OF KCC SCHEME

The benefits offered by the KCC Scheme can be both to the farmers and banks. They are
as follows:

3.5.1 BENEFITS TO FARMERS:

 Access to sufficient and timely credit to farmers.

 Less paper work and simplification of documentation.
 Flexibility to draw cash at any point of time and buy inputs as per the requirements
of the farmers and also to repay as and when surplus fund is available.
 Assured availability of credit at any time as to reduce interest burden on the farmer.
 Sanction of the facility for 3 years subject to annual review and satisfactory
operations and provision for enhancement.
 Reduction in cost of credit for availing the bank loan, Insurance cover (NAIS/PAIS)
at a very low premium rate.

3.5.2 BENEFITS TO BANKS:

 To lessen work load for branch staff by avoidance of repeat appraisal and processing
of loan papers under KCC Scheme
 Improvement in recycling of funds and better recovery of loans.
 Downsize transaction cost to the banks.
 Improving Banker - Client relationships.

3.6 ELIGIBILITY CRITERIA OF KCC SCHEME

 Individual farmers who are owners/cultivators

 Sharecroppers, tenant farmers

 Self-Help Groups of sharecroppers, farmers, tenant farmers etc

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  Farmers involved in the production of crops or activities such as animal husbandry

 Fish farmers, fishers, SHGs, JLGs, and women groups

 Fishermen who own a registered boat or any other type of fishing vessel and possess
the necessary license or permissions for fishing in estuaries or the sea.

 Poultry farmers and even those who raise sheep, rabbits, goats, pigs etc.

 Dairy: Farmers, dairy farmers, SHGs, JLGs, and tenant farmers who own, lease, or
rent sheds.

3.7 DOCUMENTS REQUIRED FOR KCC LOAN SCHEME

 Duly filled-in and signed-in application form.

 Copy of identity proof such as Aadhaar card, PAN card, Voter ID, driving licence,
etc.

 Copy of address proof document such as Aadhaar card, PAN card, Voter ID, driving
licence. The proof should have the applicant’s current address to become valid.

 Land documents.

 A passport size photograph of the applicant.

 Other documents such as security PDC as requested by the issuing bank.

3.8 APPLICATION PROCESS FOR KCC

The application process for the Kisan credit card can be done online, as well as, offline.

3.8.1 Online

 Visit the website of the bank you wish to apply for the kisan credit card scheme.
 From the list of options, choose the Kisan Credit Card.
 On clicking the option of ‘Apply’, the website will redirect you to the application
page.
 Fill the form with the required details and click on ‘Submit’.
 On doing so, an application reference number will be sent.
 If you are eligible, the bank will get back to you for the further process within 3-4
working days.

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3.8.2 Offline

Offline applications can be done by visiting the branch of the bank of your choice or by
downloading the application form from the website of the bank as well. The applicant can
visit the branch and begin the application process with the help of the bank representative.
Once the formalities are done, the bank’s loan officer can help with the loan amount for the
farmer.

3.9 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 lakhs 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 Loa up to 3 lakhs. Thus,
the effective rate of interest comes down to 4% per annum.

3.10 LONGER REPAYMENT PERIOD FOR KCC LOANS

Most of the banks in India which offer the Kisan Credit Card (KCC) loans are
looking for a longer loan repayment tenure for the loans. This has been suggested as the
agriculture sector is under significant pressure. The cycle of the loans provided under the
Kisan Credit Card scheme has been proposed to be increased to 36 or 48 months from the
12 months. This was proposed at the state level bankers’ consultancy meet in West Bengal.

In addition to the enhancement of the loan repayment tenure, the banks have also
proposed that the farmers should be allowed to avail extra loans even after failing to repay
the previous loan. However, in order to do that, they should service the interest. Public
sector banks have started a 3-stage consultation process recently on the basis of the
directions passed by the Department of Financial Services.

The main focus of the consultation process would be to discuss 9 important issues.
These include credit offered to MSMEs and agriculture sectors, digital banking, direct
transfer of benefits, and education loans. The previous meeting was an intra-bank meet.
However, this time the meeting will be an inter-bank meet at a state level.

3.11 BANKS OFFERING KCC

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 Bank Initial Credit Limit Interest Rate Tenure
(INR)
State Bank of India Up to 3 lakhs 7% 5 years
(SBI)
HDFC Bank Up to 3 lakhs 9% 5 years
Axis Bank Up to 2.5 crore 8.85%-14% 1year-cash credit,
7 year- term loans
Central Bank of Up to 3 lakhs 7% 5 years
India
Union Bank of India Up to 3 lakhs 7% 5 years
Indian Overseas Up to 3 lakhs 7% 5 years
Bank

3.12 DELIVERY CHANNELS

The following delivery channels shall be put in place to start with so that the Kisan Credit
Card is used by the farmers to effectively transact their operations in their KCC account.

1. Withdrawal through ATMs / Micro ATM

2. Withdrawal through BCs using smart cards.

3. PoS machine through input dealers

4. Mobile Banking with IMPS capabilities / IVR

5. Aadhaar enabled Cards

3.13 PERSONAL ACCIDENT INSURANCE SCHEME

 Scheme covers risk of KCC holders against death or permanent disability resulting
from accidents caused by external, violent and visible means, as under: Death due
to accident (within 12 months of the accident) caused by outward, violent and
visible means -- Rs.50,000/- Permanent total disability -- Rs.50,000/- Loss of two
limbs or two eyes or one limb and one eye -- Rs.50,000/- Loss of one limb or one
eye -- Rs.25,000/-
 Nominated office of insurance company to issue a Master Insurance Policy to each
DCCB/RRB covering all its KCC holders.
 Premium payable Rs.15/- for a one-year policy while Rs.45/- for a 3-year policy.

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  Designated insurance company will nominate one office at district level to function
as nodal office for co-ordinating implementation of personal accident insurance
scheme for KCC holders in the district.
 Insurance coverage available under Policy only from date of receipt of premium at
insurance company.
 Banks to ensure to incorporate name of Nominee in Kisan Credit Card-cum-Pass
Book.
 Simplified claim settlement procedure evolved under Scheme whereby an Enquiry-
cum-Verification Committee comprising Branch Manager of implementing bank,
Lead Bank Officer and representative of insurance company to certify nature of
accident-causing disability/death and recommend settlement of insurance claims

3.14 REVISED KCC SCHEME

The recommendations of Working Group constituted by Government of India, under the

Chairmanship of Shri T M Bhasin, Chairman & Managing Director, Indian Bank on
redesigning of KCC scheme to make it Smart Card-cum-Debit Card were accepted and a
revised KCC scheme was introduced in April 2012.The salient features of the revised KCC
scheme are as follows: -

 Flexi KCC with simple assessment prescribed for marginal farmers.

 Validity of KCC for 5 years.
 For crop loans, no separate margin need to be insisted as the margin is in-built in
scale of finance.
 No withdrawal in the account to remain outstanding for more than 12 months; no
need to bring the debit balance in the account to zero at any point of time.
 Interest subvention /incentive for prompt repayment to be available as per the
Government of India and / or State Government norms.
 No processing fee up to a limit of Rs. 3.00 lakh.
 One time documentation at the time of first allotment and thereafter simple
declaration (about crops raised/ proposed) by farmer.
 Assessment of crop loan component based on the scale of finance for the crop plus
insurance premium x Extent of area cultivated + 10% of the limit towards post-
harvest /household/consumption requirements + 20% of limit towards maintenance
expenses of farm assets.

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  KCC cum SB account instead of farmers having two separate accounts. The credit
balance in KCC cum SB accounts to be allowed to fetch interest at saving bank rate.
 Disbursement through various delivery channels, including ICT driven channels
like ATM/PoS/Mobile handsets.

3.15 GOVERNMENT OF INDIA INITIATIVES

 KCC holders have been covered under Personal Accident Insurance Scheme
against accidental death or permanent disability, upto maximum amount of Rs.
50000/- and Rs. 25000/- respectively. The premium burden will be shared by
the card issuing institutions and the borrower in the ratio of 2:1.
 Bankers were also advised to issue KCC to tenant farmers/ share croppers/oral
lessee/Joint liability groups.
 Banks were advised to cover all eligible farmers under KCC scheme.
 With a view to make the scheme more effective at ground level and serve the
farmers in the way in which it was expected to do, GoI had constituted a High-
Level Task Force which shall inter alia examine and suggest measures for
improving efficiency of KCC scheme. The report from task force has been
submitted to GoI on 30 June 2010.
 As desired by Hon’ble Finance Minister, bankers were advised to increase KCC
coverage by 20% in number and also in amount during the financial year 2010-
11 over the year 2009-10. Similar increased coverage is expected during 2011-
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3.16 NABARD INITIATIVES

 Co-operative Banks and RRBs were advised to enlarge the scope of the KCC
Scheme to cover term loans for agriculture and allied activities, including a
reasonable component to meet the consumption needs, besides the existing facility
of providing crop loan limit.
 The coverage of KCC was extended to landless labourers, oral lessees, tenant
farmers including defaulters.
 The concept of KCC has been extended to the borrowers of the long term
cooperative structure.

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  A Brochure on KCC Scheme highlighting the salient features, advantages and other
relevant information about the Scheme was brought out by Head Office and ROs
were asked to circulate the brochure to Stat e govt. departments, Commercial
Banks, Cooperative Banks, RRBs and other concerned agencies/officers so as to
generate wider awareness about the Scheme.
 Minimum Floor limit of Rs.5000/- for issue of KCC stands withdrawn.
 Studies on KCC Scheme have been conducted by NABARD periodically to
facilitate feedback on the ground level issues/problems so that changes, where
necessary, could be considered.
 On the lines of instructions of RBI to Commercial Banks, Cooperative Banks and
RRBs have been advised that they may, at their discretion, pay interest at a rate
based on their perception and other relevant factors on the minimum credit balances
in the cash credit accounts under the Kisan Credit Cards of farmers during the
period from 10th to the last day of each calendar month.
 RRBs were advised to initiate innovative publicity campaign in each area of
operation in order to cater all eligible farmers under KCC. Progress in
implementation of the Scheme
 Since launching in August 1998, around 10.09 crore Kisan Credit Cards issued upto
31 March 2011 by Cooperative Banks, Regional Rural Banks and Commercial
Banks put together.
 Scheme implemented in all States and Union Territories (except Chandigarh,
Daman & Diu and Dadra & Nagar Haveli) with all Cooperative Banks, RRBs and
Commercial Banks participating.

3.17 MISUSE OF KCC

 Credit is often being transferred towards financially well-off people

 Funds are diverted to non-agricultural use:
o Investment in Real Estate
o Purchase of Vehicles
o Higher Education of children in foreign countries.
 Quantum of land is inflated to avail higher credit.
 KCC route is used for money laundering.

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3.18 CHALLENGES OF KCC

 Lack of supervision at the branch level is the biggest challenge.

 Most branch officers are lazy, corrupt and money thirsty.

 Money intended for the poor farmer is mostly misused in many cases.

3.19 PM KISAN SAMMAN NIDHI SCHEME

The PM Kisan Samman Nidhi Scheme was launched the Indian government and
under this scheme, all farmers can avail up to Rs.6,000 every year as their income support.
This initiative had been curated and announced during the 2019 Interim Union Budget of
India

Post the release of the Budget 2020, the government is now making sure that
institutional credit is more accessible to all farmers of our country. This is being done by
bringing together the Kisan Credit Card (KCC) Scheme and the Kisan Samman Nidhi
Scheme. All beneficiaries under the Kisan Samman Nidhi Scheme can now get a Kisan
Credit Card.

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