A Kisan Credit Card (KCC) is a credit delivery mechanism that is aimed at enabling farmers to have quick and timely access to affordable credit. It was launched in 1998 by the Reserve Bank of India and NABARD. The scheme aims to reduce farmer dependence on the informal banking sector for credit – which can be very expensive and suck them into a debt spiral. The card is offered by cooperative banks, regional rural banks and public sector banks. Based on a review of the working of the KCC, the government has advised banks to convert the KCC into a smart card cum debit card.
Features of the Kisan Credit Card
1. All farmers including small and marginal farmers, share croppers and tenants are eligible for the Kisan Credit Card.
2. It simplifies the screening and credit delivery process for farmers who may not be aware of banking procedures and practices. It requires one –time documentation, and all subsequent documentation is based on the farmer’s declaration of crops to be raised etc.
3. It simplifies the multi-layered credit evaluation process of urban centric credit schemes. The credit limit is based on the land holding, income and credit history of the farmer.
4. Because of the simplified documentation and screening process, the Kisan Credit Card offers quick and timely credit.
5. Offers flexible repayment schedule after the harvest season and enables rescheduling of payments in case of a bad crop season.
6. Farmer can use it to make cash withdrawals or to take loans.
7. The Credit Card is now linked to a Savings bank account so that the farmer has one single account. Any credit balance in the account earns interest.
8. Offers insurance coverage
9. Acts as a single credit facility for the farmer for all agriculture requirements
How does the KCC work?
The KCC is like a plastic credit card and can be used as such at banks, ATMs and Points of Sale. Banks issue a credit card cum passbook that carried details of the customer’s landholding, address, credit limit and validity.
The KCC allows cash credit to farmers to take care of crop related expenses like seeds, fertilizers, pesticides, electricity and diesel charges etc. It also offers term credit for allied activities like buying equipment, land development and drip irrigation.
Interest rate: Loans under the KCC are offered at generally 7% for amounts under Rs. 3 lakh. In addition, the central government offers interest subsidies that can go up to 3 % depending on the credit history of the farmer. The amount and interest rate on loans above Rs. 3 lakhs is decided by the bank.