Kisan Credit Card

Introduction to Kisan Credit Card Scheme

The aim of Kisan Credit Card Scheme (KCC) is to provide adequate and timely support from the banking system to the farmers for their short-term credit needs during their cultivation for purchase of inputs etc., during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency.

• This scheme was announced in Budget speech of Finance Minister in 1998-99 (Yashwant Sinha was India's Finance Minister , in the NDA Government)
• In the speech it was stated that NABARD would formulate a Model scheme for issue of Kisan Credit Cards to farmers, on the basis of their land holdings, for uniform adoption by banks, so that the farmers may use them to readily purchase agricultural inputs such as seeds, fertilizers, pesticides, etc. and also draw cash for their production needs.
• NABARD formulated a Model Kisan Credit Card Scheme in consultation with major banks. Model Scheme circulated by RBI to commercial banks and by NABARD to Cooperative. Banks and RRBs in August 1998, with instructions to introduce the same in their respective area of operation.
• Please note that Model Scheme was prepared by NABARD on recommendations of R V Gupta Committee.
• As a pioneering credit delivery innovation, Kisan Credit Card Scheme aims at provision of adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner.
• Beneficiaries covered under the Scheme are issued with a credit card and a pass book or a credit card cum pass book incorporating the name, address, particulars of land holding, borrowing limit, validity period, a passport size photograph of holder etc., which may serve both as an identity card and facilitate recording of transactions on an ongoing basis.

Benefits of Kisan Credit Card Scheme

• Simplifies disbursement procedures
• Removes rigidity regarding cash and kind
• No need to apply for a loan for every crop
• Assured availability of credit at any time enabling reduced interest burden for the farmer.
• Helps buy seeds, fertilizers at farmer's convenience and choice
• Helps buy on cash-avail discount from dealers
• Credit facility for 3 years – no need for seasonal appraisal
• Maximum credit limit based on agriculture income
• Any number of withdrawals subject to credit limit
• Repayment only after harvest
• Rate of interest as applicable to agriculture advance
• Security, margin and documentation norms as applicable to agricultural advance
• Access to adequate and timely credit to farmers
• Full year's credit requirement of the borrower taken care of.
• Minimum paper work and simplification of documentation for drawal of funds from the bank.
• Flexibility to draw cash and buy inputs.
• Assured availability of credit at any time enabling reduced interest burden for the farmer.
• Flexibility of drawals from a branch other than the issuing branch at the discretion of the bank.

Features of Kisan Credit Card Scheme

1. Farmers eligible for production credit of ` 5000 or more are eligible for issue of Kisan Credit Card.
2. Eligible farmers to be provided with a Kisan Credit Card and a pass book or card-cum-pass book.
3. Revolving cash credit facility involving any number of drawals and repayments within the limit.
4. Limit to be fixed on the basis of operational land holding, cropping pattern and scale of finance.
5. Entire production credit needs for full year plus ancillary activities related to crop production to be considered while fixing limit.
6. Sub-limits may be fixed at the discretion of banks.
7. Card valid for 3 years subject to annual review. As incentive for good performance, credit limits could be enhanced to take care of increase in costs, change in cropping pattern, etc.
8. Each drawals to be repaid within a maximum period of 12 months.
9. Conversion/re-scheduling of loans also permissible in case of damage to crops due to natural calamities.
10. Security, margin, rate of interest, etc. as per RBI norms.
11. Operations may be through issuing branch (and also PACS in the case of Cooperative Banks) through other designated branches at the discretion of bank.
12. Withdrawals through slips/cheques accompanied by card and passbook.

Benefits to Banks

1. Reduction in work load for branch staff by avoidance of repeat appraisal and processing of loan papers under Kisan Credit Card Scheme.
2. Minimum paper work and simplification of documentation for drawal of funds from the bank.
3. Improvement in recycling of funds and better recovery of loans.
4. Reduction in transaction cost to the banks.
5. Better Banker - Client relationships.

Important Data: (Please remember these facts)

• At end-March 2010, 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.
• As per an statement of Minister of State for Finance, Mr Namo Narain Meena on 10 August 2010, India's banking system has issued 9.25 crore Kisan Credit Cards (KCCs) cumulatively, as on March 31, 2010 since the inception of the KCC Scheme in August 1998.
• ` 4,17,326 crore had been sanctioned under KCCs till March 31, 2010, since the beginning of the scheme.
• As per the information from National Bank for Agriculture and Rural Development, in 2007-08, 84,69,602 farmers were issued KCC, while in 2008-09, the card was issued to 85,92,473 farmers. In 2009-10 total 78,49,966 farmers received the card.
• Out of total KCCs issued and total amount sanctioned under the scheme since its inception, commercial banks accounted for the maximum share followed by cooperative banks.
• However, the number of cards issued by cooperative banks witnessed a declining trend since 2001-02, while the commercial banks more or less had a rising trend in the number of KCCs issued.
• Consequently, the share of cooperative banks in total amount sanctioned under KCC scheme also exhibited a declining trend.
• As at end-March 2010, Uttar Pradesh accounted for the maximum number of KCCs issued so far followed by Andhra Pradesh.
• Thus, these two States together accounted for one third of the total KCCs issued so far.
• Similarly, at end-March 2010, Uttar Pradesh had the maximum share of loans sanctioned under the KCC scheme followed by Maharashtra.
• However, as at end-March 2010, average amount of loan sanctioned per KCC was the highest in Gujarat followed by Punjab.
• In the north-eastern States as well as in other hilly States, the number of KCCs issued as well as amount of loans sanctioned was very low as compared with rest of the States at end-March 2010.

Insurance Under KCC

Please note that KCC holders are covered by a personal accident insurance. This cover is available when the person enters the scheme. The cover is as follows:

• Death : ` 50,000
• Disability: ` 25000
• Maximum Age to enter : 70 years.