In this article, Shubham Kumar of HNLU, Raipur discusses Kisan Credit card and its benefits.

Introduction

India is an agro-based country. 52% of India’s population is engaged in farm-related activities directly or indirectly. Agriculture contributes to 17.32% in GDP with a value of around INR 23.83 lakh crores. To support the agriculture sector government launches various schemes. One Such scheme launched is Kisan Credit Card (KCC). The KCC scheme was launched by NABARD in 1998. It aims to fulfil short-term credit needs of the farmers.

Why was Kisan Credit Card launched?

Indian farmers face difficulty in acquiring adequate finance from banks. The process of acquiring a loan is difficult since it needs a lot of documentation, security and the process is time taking. Due to illiteracy among the farmers, they often get trapped by the rural money-lenders who provide them a loan in a short period but at a very high rate and the farmers often get trapped in the debt web. To remove this complication, KCC scheme was launched to provide cost-effective credit to farmers for agricultural purposes promptly.

What are the objectives of the scheme?

The objectives of the scheme are:

• Provide short-term credit requirement for cultivation.
• Provide for expenses incurred after cultivation. Ex: Expenses of marketing, Expenses for transportation of crops to market.
• Provide money for purchasing farm tools and machinery.
• Provide for consumption requirement of farmer household.

Who are eligible to avail benefits under KCC scheme?

• Farmers who own the land and cultivate the land.
• Farmers who have taken land on rent or lease.
• Self Help Group of farmers.

What amount of loan can be availed under the scheme?

For all farmers other than marginal farmers (farmers who own less than 1 acre of land):

• If a farmer is cultivating only one crop every year, for the first year, he will be eligible for a loan amount equal to scale of finance for the crop as determined by the District Level Technical committee x Extent of area cultivated + 10% of limit towards post-harvest consumption requirement + 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance + assets insurance. For example, a farmer is growing wheat. The scale of finance for 1 acre is INR 10000. For the first year, he will get a loan equal to (10000) x no. of acres + 1000 + 2000.
• If the farmer is cultivating the same crop the second year and subsequent years till 5 th year he will be eligible for a loan equal to the amount of first-year + 10% of the scale of finance of every successive year.
• If the farmer is cultivating more than one crop in a year, he will get a loan equal to the limit as determined above.
• The maximum limit for a loan is INR 3 lakhs.
• For a detailed calculation of loan amount, refer to this link.

For marginal farmers

• They are entitled to a loan up to INR 10000 to INR 50000

What is the period of repayment of loans?

• The repayment period is fixed by the banks as per anticipated harvesting and marketing period of the crops.
• Loans given for the purchase of machinery are normally repayable within a period of 5 years which can be extended by the bank.

What is the rate of interest on such loans?

The rate of interest varies from banks to banks. Normally, the rate of interest is 7%.

What security is to be given to banks?

• For loans up to INR 1 Lakh banks are to waive any security requirement.
• For loans up to INR 3 Lakhs banks may consider hypothecation of crops.
• Collateral security may be obtained at the discretion of Bank for loan limits above Rs.1.00 lakh in case of non tie-up and above Rs.3.00 lakh in case of tie-up advances.

Why take a loan under KCC scheme instead of a general loan?

The following benefits are given only to Kisan Credit Card holders:

• It offers flexible repayment.
• Disbursement of the fund is simple.
• Single credit can be availed for all agricultural requirements.
• Cash discounts can be availed from merchants of seeds, fertilizers, etc.
• There is no restriction on the number of cash withdrawals tilas long as it is within the limit of the card.
• Repayment can be done once the harvest is over.
• Lower interest rates.
• The fund can be withdrawn from any of the bank branches.

Other features of the KCC

• Farmers who are eligible for the Kisan Credit Card is offered a passbook or a card-cum-pass book.
• If a farmer is eligible for a production credit of Rs. 5000 or more, then he/she is eligible for a Kisan Credit Card.
• As per the concerned bank’s discretion, sub-limits may be fixed.
• The facility of revolving credit is available for any amount of withdrawals and repayment made within the credit limit. The credit limit is fixed based on the individual’s land holdings, the scale of finance, annual production credit needs, etc.
• Based on the annual review, the credit card can be valid up to 3 years.
• Repayment of the amount borrowed can be made within a period of up to 12 months.
• Credit limits will be increased to accommodate change in cropping pattern, increase in costs, etc. as an incentive for good record on credit card usage.
• Operations will be either through PACS in the case of Cooperative Banks or issuing branch in case of other banks, at the sole discretion of the bank.
• Conversion/rescheduling of loans also permissible in case of damage to crops due to natural calamities.
• Security, margin, the rate of interest, etc. are set as per RBI norms.

How to get a Kisan Credit Card?

Kisan Credit Card can be availed from any branch of any bank. The procedures to get the card may vary in different banks. The operation of this facility is simple and straightforward. Based on the land holdings and the income earned from it, banks issue farmers Kisan Credit Cards. The farmers should have a good credit history to be eligible for the same. Those who receive the Kisan Credit Card, get facilities like: passbook with the name, particulars of landholding, address, validity period, credit limit, etc., which serves as the customer’s unique identification as well as a system for tracking their transactions. In addition to the passbook, beneficiaries also get a debit card for use in ATMs, PoS machines powered by MasterCard or VISA. Generally, the documents required by every bank are,

• Duly filled in application form.
• Identity proof- Voter ID card/PAN card/Passport/Aadhar card/Driving License etc
• Address proof- Voter ID card/Passport/Aadhar card/Driving license etc.
• Currently, there is no bank accepting online application for a credit card.
• Application form of the Axis Bank can be accessed at this link.

Comparison of KCC issued by different bank

Banks	Credit Limit	Maximum Tenure	Insurance Coverage
Axis Bank	Credit limit up to INR 2.50 lakhs	5 years	up to INR 50,000/-
Bank of India	25% of the farmer’s gross estimated income, or a maximum of Rs.50,000/	Credit up to Rs.10 lakhs can be offered to a farmer for extended period of 12 months	N/A
State Bank of India	Short-term credit limit is fixed for the first year depending upon the crops cultivated as per proposed cropping pattern & scale of finance	12 months for long-term crops.	Personal Accident Insurance Scheme (PAIS), Asset insurance and Crop insurance are covered by the scheme.
Indian Overseas Bank (IOB)	Credit Limit is based on the scale of finance, cropping pattern and the extent of cultivation.	5 years	N/A

How are the funds disbursed?

• Withdrawal can be done through a branch.
• Withdrawal can be done through cheque.
• Withdrawal through the cards in any ATM.
• Withdrawal through PoS available with dealers/merchants.
• Transfer through mobile or online banking.

Personal Accident Insurance Scheme under KCC

The KCC scheme covers risk against death or permanent disability. In case of death or loss of both limbs or permanent disability, due to accident INR, 50,000 is awarded to the KCC holder. In the case where there is a loss of one limb, INR 25,000 is provided to the card holder. The premium payable is Rs.15 per year.

Can I take loan from any bank under KCC scheme?

Yes, loan can be taken from any branch of any bank. The govt. has notified all banks under private as well as public sector to extend credit to farmers under the scheme.

Can I take loan from more than one bank under KCC scheme?

No, if a loan has already been taken under the KCC scheme from a bank, another loan under the scheme cannot be taken from other banks.

Recovery of loan under KCC scheme

The process of recovery of loan differs for every bank, however, the process of recovery of loan extended under KCC scheme is similar to the process of recovery of general loan. Sometimes the govt. Waives off the loan taken by farmers under KCC scheme. Ex. In 2009 UPA govt. waived off the loans given to marginal farmers.

Conclusion

Since the inception of the scheme, 14.64 lakhs of KCC cards have been issued. The total crop loan extended under the scheme is INR 6,35,412 crore, but the farmer’s suicide has been increased by 40%. Last year, 12,412 farmers committed suicide due to debt related issues or crop failure. This number shows that though scheme for farmers welfare exists, the benefits under the scheme is not reaching the beneficiaries. It is found out that most of the farmers do not know about any such scheme. They are also less enthusiastic about crop insurance scheme since settlement in most cases is delayed. The illiterate farmers in India do not know how to use debit cards, and also non-availability of ATMs in rural areas add up to their problems. To get the best possible out of this scheme financial literacy programs should be started by the government. The banks should actively engage in promotion of KCC schemes. Farmers should be taught how to use debit cards. Agriculture in India has tremendous potential. If harnessed properly India could become the leading exporter of agro-based products.