Status of Kisan Credit Card in India
Author: Dr Ravindra Singh Shekhawat

Agriculture is the backbone of Indian economy, with nearly 58 per cent of the population of the country continuing to depend on for their livelihood. Credit as an input has a dominant role in agriculture sector; therefore a multi-agency approach has been adopted by the Reserve Bank of India (RBI) for ensuring credit flow. Provision of timely and adequate agricultural credit and its disbursement to the farmers has been one of the major challenges for banks in India. Continuous innovations are required in order to achieve the aim. Kisan Credit Card in this direction is not a new concept in the field of agricultural banking in India.

The Kisan Credit Card (KCC) scheme is a landmark in the history of rural credit in India. The mechanism of credit cards has been one of the key products developed to expand the outreach of banks and simplify the credit delivery system. The announcement relating to the introduction of Kisan Credit Card scheme was made by the Union Finance Minister during the budget speech for the year 1998-99. National Bank for Agriculture and Rural Development(NABARD) formulated Kisan Credit Card scheme for uniform adoption by the banks so that the farmers may use the card to readily purchase agricultural inputs such as seeds, fertilizers, pesticides etc. and draw cash for their production needs. The model scheme was circulated to Commercial Banks, Co-operative Banks and Regional Rural Banks in August 1998. Kisan Credit Card Scheme aims at providing adequate and timely support from the banking system to the farmers for their short term credit needs for cultivation of crops. This mainly helps them to purchase of inputs during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency.

The main objectives of the Kisan Credit Card (KCC) Scheme

1. To provide insurance coverage and financial support to the farmers in the event of failure of crops as a result of natural calamities, pests and diseases.

2. To meet short term production needs for the cultivation of crop for the entire year.

3. To meet working capital requirement for allied and ancillary activities.

4. To meet contingency expenditure for ancillary expanses.

Salient features of the Kisan Credit Card (KCC) Scheme

• Eligible farmers are provided with a Kisan Credit Card and a pass- book or card-cum- passbook.

• Revolving cash credit facility involving any number of drawals and repayments within the limit.

• Credit limit is fixed on the basis of operational landholding, cropping pattern and scale of finance. Entire production credit needs for full year plus ancillary activities related to crop production is considered while fixing limit.

• Sub-limits may be fixed at the discretion of banks.

• Card is valid for three years subject to annual renewal. As incentive for good performance, credit limits could be enhanced to take care of increase in costs, change in cropping pattern, etc.

• Each drawls to be repaid within a maximum period of twelve months.

• Conversion/reschedulement of loans also permissible in case of damage to crops due to natural calamities.

• Security, margin, rate of interest, etc. are as per RBI norms.

• Operations may be through issuing branch (and also PACs in the case of Cooperative Banks) or through other designated branches at the discretion of bank.

• Withdrawals through slips/cheques accompanied by card and passbook.

Advantages of the Kisan Credit Card Scheme

1. Access to adequate and timely credit to farmers.

2. Full year's credit requirement of the borrower is taken care.

3. Minimum paper work and simplification of documentation for drawal of funds from the bank.

4. Flexibility to draw cash and buy inputs.

5. Assured availability of credit at any time enabling reduced interest burden for the farmer.

6. Sanction of the facility for three years subject to annual review and satisfactory operations and provision for enhancement.

7. Flexibility of drawls from a branch other than the issuing branch at the discretion of the bank.

Status of KCC in India

• At the end of March 2014, the total number of cards issued and sanctioned amount of loans under the scheme witnessed an increase over the previous year. The average amount of sanctioned loan per card holder exhibited a steady rising trend since its inception except for the last two years.

• However, at the end of March 2014 average amount of loan sanctioned per KCC was the highest in Gujarat followed by Punjab.

• Out of total KCCs issued and total amount sanctioned under scheme since its Inception, Commercial banks accounted for the maximum share (48.99 %) followed by Co-operative banks (35.82 %) and Regional Rural Banks (15.96 %).

• As at end of March 2014, Andhra Pradesh accounted for maximum number of KCCs issued so far followed by Uttar Pradesh. These two states together accounted for one third of the total KCC issued.

• Similarly, at end of March 2014, Uttar Pradesh had maximum share of loans sanctioned under KCC scheme followed by Maharashtra.

• Since launching in August 1998, around 10 crore live Kisan Credit Cards were issued upto 31 March 2014 by Cooperative Banks, Regional Rural Banks and Commercial Banks put together.

About Author / Additional Info:
Working as a Scientist, Agricultural Economics at ICAR-IASRI, New Delhi.