Agro Money

Kisan Credit Card Scheme

Genesis
In spite of various measures to rejuvenate farm credit, the flow of credit remained quantitatively and qualitatively poor. The institutional sources of credit meet only 51 per cent of the credit requirements of farm sector. The non-institutional sources were mainly reached by farmers due to lack of collaterals, frequent needs, undue delays, complicated procedures and malpractices adopted by institutional lending agencies. With a view to inquire into the reasons for the problems of the farm credit and suggest measure for improving the delivering system, RBI set up a one man Committee of Shri R. V. Gupta to in December 1997. The Committee submitted its report in April 1998. It was against this background that RBI directed all Public Sector Banks (PSBs), RRBs and cooperative banks to introduce "Kisan Credit Card Scheme (KCCS)" on the lines of the model scheme formulated by NABARD and in due course of time the KCCS was adopted by all the directed agencies.

Objective

The KCCS aims at adequate and timely support from banking system to the farmer for crop production and ancillary activities. The credit limit (loan) is sanctioned in proportion to the size of the owned land but some flexibility is provided for leased-in land in addition to owned land. The borrowing limit is fixed on the basis of proposed cropping pattern. Most of the banks are adhering to Scales of Finance (SOF) decided by the State Level Bankers Committee (SLBC) but some banks have fixed their own SOF. The nature of credit extended under KCCS is revolving cash credit i.e., it provides for any number of withdrawals and repayments within the limit. This feature would provide flexibility and reduce the interest burden upon KCCS beneficiary. Security and margin norms would be in conformity with the guidelines issued by RBI and NABARD from time to time. With effect from 2001-2002, it was made obligatory for the implementing agencies to operate the KCCS with an in-built component of life-insurance for KCCS beneficiary. The KCCS as envisaged has substituted all other existing institutional modes of short term credit delivery.

The features of the scheme at a glance are:

• Type of revolving cash credit facility with unlimited withdrawals and repayments.
• Meet the production credit need, cultivation expenses, and contingency expenses of the farmers.
• Limits based on the basis of operational land holding, cropping pattern and scale of finance. This limit is inclusive of 20% of production credit.
• Each withdrawal to be paid within 12 months.
• Card valid for 3 years subject to annual renewals.
• Credit limits can be enhanced depending on performance and needs.
• Rescheduling is also possible depending upon the situation. If for example the crops fail due to a natural calamity and the farmer is not able to repay his loan, then he could get an extension of upto four years.
• Cash withdrawals through slips accompanied by card and passbook.
• A credit cum passbook would be issued.
• All branches engaged in agricultural lending could issue Kisan Credit Cards.

Benefit of KCC 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