Kisan Credit Card
Kisan Credit Card
Kisan Credit Card (KCC) scheme was established in 1998 for issuing Kisan Credit Cards to farmers depending on the holdings for uniform adoption by the banks. The farmers can Kisan Credit Card to readily purchase agriculture inputs like fertilizers, seeds, pesticides etc and withdraw cash for their production needs. The scheme was further enhanced for the investment credit requirement of farmers and non-farm activities in the year 2004. Kisan Credit Card scheme was revised in 2012 to simply the scheme and to issue Electronic Kisan Credit Cards.
Objective of the Scheme
The Kisan Credit Card scheme aims to provide adequate and timely credit support from the banking system under a single window with a flexible and simplified procedure to the farmers for cultivation and other needs like the following.
- To meet the short term credit requirements in order to cultivate crops.
- To meet post-harvest expenses.
- Produce marketing loan.
- Consumption needs of farmer household.
- Working capital to maintain farm assets and activities that are related to agriculture.
- Investment credit requirement for agriculture.
Given below are the people who are eligible for this scheme.
- Farmers both individual and joint borrowers who are owner-cultivators.
- Tenant farmers, oral lessees and share croppers.
- Joint Liability Groups (JLGs) or Self Help Groups (SHGs) of farmers along with tenant farmers, sharecroppers etc.
Implementation of the Scheme
The implementation of the Kisan Credit Card scheme is vested with the Commercial Banks, RRBs, Small Finance Banks and Cooperatives.
Fixation of Credit Limit
The credit limit of the Kisan Credit Card is as follows.
- The short term limit to arrive for the first year: Scale of finance for the crop (estimated by the District Level Technical Committee) x Extent of area cultivated =10% of the limit towards post-harvest/ house-hold/ consumption requirements = 20% of the limit towards repairs and maintenance expenses of farm assets + crop insurance and accident insurance with PAIS, health insurance and asset insurance.
- The limits for the second and subsequent year: First-year limit for the crop cultivation purpose arrived at more than 10% of the limit towards the cost escalation/ increase in the scale of finance for every following year and estimated term loan component for the tenure of Kisan Credit Card which is five years.
- For cultivating more than one crop in a year: The limit will be fixed based on the crops cultivated according to the cropping pattern for the first year with an additional 10% of the limit towards the cost escalation/ increase in the scale of finance for every successive year. It is considered that the farmer adopts the same cropping pattern for the succeeding four years. If the cropping patterns that are adopted by the farmers are changed in the subsequent year, the limit may be reworked.
- Term loan for investment: The term loan required for investment has to be made towards the minor irrigation, land development, purchase of farm equipment and agricultural activities. The banks may choose the quantum of credit for the term and the working asset that is proposed to be acquired by the farmer, agricultural activities that are already undertaken on the farm, the bank’s judgement on repayment capacity with regard to the total loan burden developing on the farmer, taking into account the existing loan obligations. The long term loan limit is based on the proposed investments during the five year period and the bank’s perception of the repaying capacity of the farmer.
- Maximum Permissible Limit: The short term loan limit prescribed for the fifth year with the estimated long term loan requirement will be considered as the Maximum Permissible Limit (MPL) and this will be considered as the Kisan Credit Card Limit.
Fixation of Sub-limits
- Short term loans and term loans are authorised by different interest rates. For now, short term crop loans up to Rs. 3 Lakh are included under Interest Subvention Scheme/ Prompt Repayment Incentive scheme of the Government of India. Moreover, repayment schedule and norms vary for short term and term loans. Therefore, in order to have operational and accounting convenience, the card limit has to be bifurcated into individual sub-limits for short term cash credit limit cum savings account and term loans.
- Drawing limit for short term cash credit has to be fixed based on the cropping pattern. The amount for crop production, repair and maintenance of farm assets and consumption may be permitted to be drawn according to the convenience of the farmer. If the revision of scale of finance for any year by the district level technical committee is more than the notional hike of 10% contemplated while fixing the five-year limit, a revised drawable limit may be fixed after consulting the farmer. If these revisions require the card limit to be enhanced, the same can be done and the farmer will be advised.
- For term loans, instalments may be permitted to be withdrawn depending on the nature of investment and repayment schedule drew according to the economic life of the proposed investments. It has to be ensured that at any point in time, the total liability has to be within the drawing limit of the concerned year.
- When the card limit/ liability that is arrived warrants additional security, the banks may take suitable collateral as per the policy.