Introduced in 1998, the Kisan Credit Card (KCC) scheme was established to provide adequate and timely credit support to farmers for their cultivation needs and other agricultural requirements. Such needs include the purchase of agriculture inputs such as seeds, fertilizers, pesticides, etc., and cash withdrawal for other production needs. The KCC scheme was further extended for the investment credit requirement of farmers in 2004.
The Union Minister of Fisheries, Animal Husbandry, and Dairying recently reviewed the progress in issuing Kisan Credit Cards to impoverished farmers from the Animal Husbandry, Dairying & Fisheries Sector with Banks & Regional Rural Banks.
Notable Features & Implementing Agencies
The KCC scheme is implemented through Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks, and Cooperatives. An attractive feature of this scheme is an ATM-enabled RuPay debit card with facilities for one-time documentation, built-in cost escalation in the limit, and any number of withdrawals within the limit.
In addition to saturation, banks are also taking steps to link Aadhaar immediately, as no interest subvention will be given if the Aadhaar numbers are not seeded to KCC accounts. The government has initiated several measures for KCC saturation which includes adding farmers engaged in animal husbandry and fisheries, no processing fee of loan under KCC, and raising the limit of collateral-free agriculture loans from Rs. 1 lakh to Rs.1.6 lakh.
Kisan Credit Card’s Objectives
The KCC aims to address the short-term credit requirements for cultivation of crops, post-harvest expenses, and fulfill consumption requirements of farmer households. Additional objectives include providing working capital for maintenance of farm assets and activities allied to agriculture and investment credit requirement for agriculture and allied activities.
Financial Provisions Under the KCC Scheme
The Government of India has ensured the availability of agricultural credit at a cost of 7% per annum to farmers through an interest subvention scheme of 2% for short term crop loans up to Rs. 3 lakh. Furthermore, the government provides an additional 2% interest subvention and prompt repayment incentive of 3% to the farmers.
Recent Achievements of the KCC Scheme
By June 2020, around 25 lakh applications had been sanctioned for Nationwide Fishery KCC. As part of the Atmanirbhar Bharat Package, the Government announced its intention to cover 2.5 crore farmers under the Kisan Credit Card (KCC) scheme with a credit boost of Rs. 2 lakh crores through a special saturation drive. So far, over 1.5 crore farmers have been covered under KCC, with a sanctioned credit limit of Rs. 1.35 lakh crore.
Misuse of KCC
However, there have also been instances of misuse of the KCC. For example, credit is often being transferred towards financially better-off people, and funds are diverted to non-agricultural use such as investment in real estate, purchase of vehicles, and higher education of children in foreign countries. Additionally, the quantum of land is inflated to avail higher credit, and the KCC route is misused for money laundering.
Recommendations for Improvement
Some recommendations for improvement include requiring all banks to follow the KCC guidelines properly and provide due acknowledgment for KCC applications within a fixed timeline. Reasons for rejection should be clearly indicated so that field officers could rectify and resubmit the forms. KCC should be extended to people from the Maldhari (Ghumantu) Community, who do not stay in one place and have no collateral security to offer, and to impoverished fishermen who are unable to provide any collateral.
