KISAN CREDIT CARD (KCC) SCHEME

KCC scheme was first introduced during the year 1998 for farmers on the basis of their holdings by the banks for purchase of agriculture inputs such as seeds, fertilizers, pesticides etc. and draw cash for their production needs. The scheme was further extended for the investment credit requirement of farmers viz. allied and non-farm activities in the year 2004. 

The Kisan Credit Card has emerged as an innovative credit delivery mechanism to meet the production credit requirements of the farmers in a timely and hassle-free manner. The GOI, Ministry of Finance constituted a Working Group under the chairmanship of Shri T M Bhasin, Chairman & Managing, Indian Bank to review the KCC Scheme. Based on the recommendations of the Working Group which were accepted by the GOI, the revised KCC Scheme is effective from 12 May 2012.

In the Budget 2018-19 the Union Government had announced their decision to extend the facilities of Kisan Credit Card (KCC) to Animal Husbandry farmers and Fisheries (AH & F) to help them meet their working capital requirements. The revised KCC Scheme is to be Implemented by Commercial Banks, RRBs and cooperatives.  

Applicability of the Scheme: The Revised KCC Scheme detailed in the ensuing paragraphs is to be implemented by Commercial Banks, RRBs, and Cooperatives. The scheme provides broad guidelines to the banks for operationalising the KCC scheme.

Objectives/Purpose: Kisan Credit Card Scheme aims at providing adequate and timely credit support from the banking system under a single window to the farmers for their cultivation & other needs as indicated below:

  1. To meet the short-term credit requirements for cultivation of crops;
  2. Post-harvest expenses;
  3. Produce Marketing loan;
  4. Consumption requirements of farmer household;
  5. Working capital for maintenance of farm assets and activities allied to agriculture, like dairy animals, inland fishery etc.;
  6. Investment credit requirement for agriculture and allied activities like pump sets, sprayers, dairy animals etc.

Note: The aggregate of components ‘1’ to ‘5’ above will form the short term credit limit portion and the aggregate of components under ‘6’ will form the long term credit limit portion.

Eligibility: Following farmers are eligible under the scheme:

  1. All Farmers – Individuals / Joint borrowers who are owner cultivators;
  2. Tenant Farmers, Oral Lessees & Share Croppers;
  3. SHGs or Joint Liability Groups of Farmers including tenant farmers, share croppers etc.

Fixation of credit limit/Loan amount: The credit limit under the Kisan Credit Card may be fixed as under:

For Marginal Farmers: A flexible limit of Rs.10,000 to Rs.50,000 be provided (as Flexi KCC) based on the land holding and crops grown including post-harvest warehouse storage related credit needs and other farm expenses, consumption needs, etc., plus small term loan investments like purchase of farm equipment, establishing mini dairy/backyard poultry as per assessment of Branch Manager without relating it to the value of land. The composite KCC limit is to be fixed for a period of five years on this basis. Wherever higher limit is required due to change in cropping pattern and/or scale of finance, the limit may be arrived at as per the estimation.

All farmers other than marginal farmers: Limit is arrived as per scale of finance.

The short-term limit to be arrived for the first year: Scale of finance for the crop (as decided by District Level Technical Committee) x Extent of area cultivated + 10% of limit towards post-harvest / household / consumption requirements + 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance, PAIS & asset insurance.

I. LOAN LIMIT FOR NEXT 5 YEARS:

  • Add 10% of first year limit towards cost escalation/increase in scale of finance-------2
  • Add 10% of second year limit towards cost escalation/increase in scale of finance-------3
  • Add 10% of third year limit towards cost escalation/increase in scale of finance-------4
  • Add 10% of fourth year limit towards cost escalation/increase in scale of finance-------5

II. Term loans: Term loan for investments towards land development, minor irrigation, purchase of farm equipment and allied agricultural activities. The banks may fix the quantum of credit for term and working capital limit for agricultural and allied activities, etc., The long-term loan limit is based on the proposed investments during the five-year period and the bank’s perception on the repaying capacity of the farmer

Maximum Permissible Limit: The short-term loan limit arrived for the 5th year plus the estimated long-term loan requirement will be the Maximum Permissible Limit (MPL) and treated as the Kisan Credit Card Limit.

  • Total crop loan limit-------------I
  • Add Term Loan component-------II
  • Maximum permissible limit/KCC limit = I+II
(A) Illustration: Marginal farmer raising single crop in a year.

Assumptions:

  • Land holding: 1 acre
  • Cropping pattern:
  1. Paddy -1 acre (Scale of finance plus crop insurance per acre Rs. 11,000/-)
  2. There is no change in cropping pattern for 5 years
  • Investment /Allied Activities: One non-descript Milch Animal (Unit cost: Rs. 15,000/-)

ILLUSTRATION OF KCC LIMIT

(Marginal farmer raising single crop in a year)

Year Crop Loan Component  Amount
1 Cost of cultivation of 1 acres of Paddy Add: 10% towards post harvest/ household expenses/ consumption Add 20% towards farm maintenance Total Crop Loan Limit for 1st year Rs.11000/- Rs.1100/- Rs.2200/- Rs.14300/-
2 Loan Limit for 2nd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 14300/i.e. Rs. 1430/- ) Rs.1430/- + Rs.15730/-
3 Loan Limit for 3rd year Add: 10% of the limit towards cost of escalation/increase in scale of finance (10% of 15730/-i.e.Rs. 1573 or Rs. 1570/-) Rs. 1570/-+ Rs.17300/-
4 Loan limit for 4th year Add: 10% of the limit towards cost of escalation in scale of finance (10% of 17300/-i.e.Rs. 1730/- Rs.1730/-+ Rs.19030/--
5 Loan Limit for 5th  year  Add: 10% of the limit towards cost of escalation in scale of finance (10% of 19030/-i.e.Rs. 1903 or Rs. 1900/-) Rs.1900/-+ Rs.19030/- = Rs.20930/- Say Rs.21000/-  (A)
ii. Term Loan Component 1st year: cost of 1 Milch animal Rs. 15000/-  (B)
Maximum Permissible limit / KCC Limit A+B = Rs. 36000/-
Note Drawing limit will be reduced every year on repayment schedule of term loan(s) availed and withdrawals will be allowed up to the drawing limit.  Application   & documents to be obtained for full limit for 5 years.  Of course, Proposal to be prepared for full limit.
(B) Illustration: Farmer raising multiple crops in a year.    
Assumptions:
  • Land holding: 2 acres
  • Cropping pattern:
  1. Paddy-1 acre (scale of finance plus crop insurance per acre: Rs. 11000/-).
  2. Sugarcane- 1 acre (scale of finance plus crop insurance per acre: Rs. 22000/-).
  • Investment /Allied Activities:
  1. Establishment of 1+1 Dairy Unit in 1st year (unit cost: Rs. 20000/- per animal).
  2. Replacement of Pump set in 3rd year (unit Cost: Rs. 30000/-).

ILLUSTRATION

(Farmer raising multiple crops in a year)

 
Year Crop Loan Component  Amount
1 Cost of cultivation of 1 acre of Paddy and 1 acre of sugarcane ( 11000 + 22000) Add: 10% towards post harvest/household expenses/consumption Add 20% towards farm maintenance Total Crop Loan Limit for 1st year. Rs.33000/-   Rs.3300/- Rs.6600/- Rs.42900/-
2 Loan Limit for 2nd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of Rs. 42900/- i.e. Rs. 4300/-) Rs.4300/- + Rs.47200/-
3 Loan Limit for 3rd year Add: 10% of the limit towards cost of escalation/increase in scale of finance (10% of Rs. 47200/- i.e. Rs. 4700/-) Rs.4700/-+ Rs.51900/-
4 Loan limit for 4th year Add: 10% of the limit towards cost of escalation in scale of finance (10% of Rs. 51900/- i.e. Rs. 5200/-) Rs.5200/-+ Rs.57100/--
5 Loan Limit for 5th year  Add: 10% of the limit towards cost of escalation in scale of finance (10% of 57100/-i.e.Rs.5700/-) Rs.5700/- Rs.57100/- Rs.62800/- Say Rs.63000/-  (A)
ii. Term Loan Component 1st year: cost of 1+1 Dairy Unit 3rd year: Replacement of Pump set Rs.40000/- Rs.30000/- Rs.70000/-  (B)
Maximum Permissible limit/KCC Limit A+B = Rs. 133000/-
Note Drawing limit will be reduced every year on repayment schedule of term loan(s) availed and withdrawals will be allowed up to the drawing limit.  Application   & documents to be obtained for full limit for 5 years.  Of course, Proposal to be prepared for full limit.
(C) Illustration: Other farmer raising multiple crops in a year.        
Assumptions:
  • Land holding : 10 acres
  • Cropping pattern:
  1. Paddy-5 acres (scale of finance plus crop insurance per acre: Rs. 11000/-)
  2. Followed by groundnut-5 acres (scale of finance plus crop insurance per acre: Rs. 10,000/-).
  3. Sugarcane- 5 acres (scale of finance plus crop insurance per acre: Rs. 22,000/-).
  • Investment /Allied Activities:
  1. Establishment of 2+2 Dairy Unit in 1st year (Unit cost: Rs. 100,000/-).
  2. Purchase of Tractor in 1st year (unit Cost: Rs. 600,000/-).

ILLUSTRATION OF KCC LIMIT

(Other farmer raising multiple crops in a year) 

Year Crop Loan Component  Amount
1 Cost of cultivation of 5 acres of Paddy, 5 acres of groundnut and 5 acres of sugarcane( 55000 + 50000 + 110000) Add: 10% towards post harvest/ household expenses/ consumption Add 20% towards farm maintenance Total Crop Loan Limit for 1st year Rs.215000/-     Rs.21500/- Rs.43000/-   Rs.279500/-
2 Loan Limit for 2nd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of Rs. 279500/- i.e. Rs.27950/- ) Rs.27950/- + Rs.307450/-
3 Loan Limit for 3rd year Add: 10% of the limit towards cost of escalation/increase in scale of finance (10% of Rs. 307450/- i.e. Rs.30750/-) Rs.30750/-+ Rs.338200/-
4 Loan limit for 4th year Add: 10% of the limit towards cost of escalation in scale of finance (10% of Rs. 338200/- i.e. Rs.33800/-) Rs.33800/-+ Rs.372000/--
5 Loan Limit for 5th  year  Add: 10% of the limit towards cost of escalation in scale of finance (10% of 372000/-i.e.Rs.37200/-) Rs.37200/-+ Rs.372000/- = Rs.409200/- Say Rs.409000/-  (A)
ii. Term Loan Component 1st year : cost of 2+2 Dairy Unit                  Purchase of Tractor                 Total Term Loan Rs.100000/- Rs.600000/- Rs.700000/-  (B)
Maximum Permissible limit/KCC Limit A+B = Rs. 11,09,000/-
Note Drawing limit will be reduced every year on repayment schedule of term loan(s) availed and withdrawals will be allowed up to the drawing limit.  Application   & documents to be obtained for full limit for 5 years.  Of course, Proposal to be prepared for full limit.
 

ISSUE OF ELECTRONIC KISAN CREDIT CARDS (ATM): ATM card must be issued in all KCC accounts.

  • All new KCC must be issued as smart card cum debit card as laid down in Policy.
  • Further, at the time of renewal of existing KCC, farmers must be issued smart card cum debit card.
  • The short term credit limit and the term loan limit are two distinct components of the aggregate KCC limit bearing different rates of interest and repayment periods.
  • Until a composite card could be issued with appropriate software to separately account transactions in the sub limits, two separate electronic cards may be issued for all new/renewed cards.

Disbursement: ATM card must be issued in all KCC accounts. The short-term component of the KCC limit is in the nature of revolving cash credit facility. There should be no restriction in number of debits and credits. However, each installment of the drawable limit drawn in a particular year will have to be repaid within 12 months. The drawing limit for the current season/year could be allowed to be drawn using any of the following delivery channels.

  1. Operations through branch;
  2. Operations using Cheque facility;
  3. Withdrawal through ATM / Debit cards;
  4. Operations through Business Correspondents and ultra-small branches;
  5. Operation through PoS available in Sugar Mills/ Contract farming companies, etc., especially for tie-up advances;
  6. Operations through PoS available with input dealers;
  7. Mobile based transfer transactions at agricultural input dealers and mandies.

Note: (5), (6) & (7) to be introduced as early as possible so as to reduce transaction costs of both the bank as well as the farmer.

Rate of Interest (ROI): Rate of Interest will be linked to MCLR/RBLR and is left to the discretion of the banks.

Interest Subvention: Interest Subvention of 2% p.a. will be available to banks on the KCC Scheme. As per RBI communication Ref No. RPCD:FSD:BC:71/05.04.02/2013-14 dated 04/12/2013 for computation of Interest subvention on KCC limit, only following activities are considered.

  1. Short term credit requirements for cultivation of crops
  2. Post-harvest expenses

Additional Interest subvention @3% will be available to the prompt paying farmers from the date of disbursement of crop loan to the actual date of repayment by farmers or up to date fixed by bank for repayment of crop loan whichever is earlier.

Repayment Period: Each withdrawal under the short term sub-limit as estimated under (1) to (5) of above para, be allowed to be liquidated in 12 months without the need to bring the debit balance in the account to zero at any point of time. No withdrawal in the account should remain outstanding for more than 12 months.

The term loan component will be normally repayable within a period of 5 to 9 years depending on the type of activity / investment as per the existing guidelines applicable for investment credit.

Margin for Crop Loan: No separate margin insisted as the margin is in built while fixing of Scale of Finance by District Level Technical Committee (DLTC).

Margin for Term Loan: Up to Rs. 1.60 lac:- NIL,

for limit more than Rs. 1.60 lac:- 15 -25 %.

Security: Security requirement may be as under:

Hypothecation of crops up to card limit of Rs. 1.60 lakh as per the extant RBI guidelines.

With tie-up for recovery: Banks may consider sanctioning loans on hypothecation of crops upto card limit of Rs.3.00 lakh without insisting on collateral security.

  • Collateral security may be obtained at the discretion of Bank for loan limits above Rs.1.60 lakh in case of non tie-up and above Rs.3.00 lakh in case of tie-up advances.
  • In States where banks have the facility of on-line creation of charge on the land records, the same shall be ensured.

Other features: Other Features in the KCC uniformity to be adopted in respect of following:

  1. Interest Subvention/Incentive for prompt repayment as advised by Government of India and / or State Governments. The bankers will make the farmers aware of this facility;
  2. The KCC holder should have the option to take benefit of Crop Insurance, Assets Insurance, Personal Accident Insurance Scheme (PAIS), and Health Insurance (wherever product is available and have premium paid through his KCC account);
  3. One-time documentation at the time of first availment and thereafter simple declaration (about crops raised / proposed) by farmer from the second year onwards;
  4. No bank’s charges as PPC/DOC etc. up to Rs. 3.00 lakh card limit;
  5. KCC short term limit fetch interest for credit balance at SB interest rate.

Selected activities under Agricultural Finance: Besides the KCC Scheme, banks financed to all the purpose of direct and indirect agriculture and allied activities. RBI and NABARD design most of the agriculture loan schemes and monitoring the implementation. 

For details you may visit RBI website for Master Circular on KCC:

https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=11034

Books Written by Abinash Mandilwar