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.
1. This scheme was announced in Budget speech of Finance Minister in 1998-99 (Shri Yashwant Sinha was India’s Finance Minister at that time)
2. 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.
3. 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.
4. 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.
5. 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.
1. Simplifies disbursement procedures
2. Removes rigidity regarding cash and kind
3. No need to apply for a loan for every crop
4. Assured availability of credit at any time enabling reduced interest burden for the farmer.
5. Helps buy seeds, fertilizers at farmer’s convenience and choice
6. Helps buy on cash-avail discount from dealers
7. Credit facility for 3 years – no need for seasonal appraisal
8. Maximum credit limit based on agriculture income
9. Any number of withdrawals subject to credit limit
10. Repayment only after harvest
11. Rate of interest as applicable to agriculture advance
12. Security, margin and documentation norms as applicable to agricultural advance
13. Access to adequate and timely credit to farmers
14. Full year’s credit requirement of the borrower taken care of.
15. Minimum paper work and simplification of documentation for drawal of funds from the bank.
16. Flexibility to draw cash and buy inputs.
17. Assured availability of credit at any time enabling reduced interest burden for the farmer.
18. Flexibility of drawals from a branch other than the issuing branch at the discretion of the bank.
Salient features of the Kisan Credit Card (KCC) Scheme
1. Farmers eligible for production credit of Rs. 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 drawal to be repaid within a maximum period of 12 months.
9. Conversion/reschedulement 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 of the Scheme to the 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.
Over 7 crore Kisan Credit Cards have been issued to farmers till the end of March 2008 from its inception in 1998.In 2006-07, 85.11 lakh cards were issued and Rs 46.72 lakh credit extended to farmers through these.
Farmers, who took agriculture loans through the Kisan Credit Card, were also covered under the Rs 60,000-crore loan waiver scheme announced in the Budget 2008-09.
With inputs from NABARD