Kisan Credit Card

Kisan Credit Card (KCC) is a credit scheme launched in 1998 by the Government of India to provide farmers with timely and adequate credit for their agricultural needs. It allows farmers to withdraw money as needed up to a sanctioned credit limit, making it a flexible and farmer-friendly alternative to traditional crop loans.

What Is the Kisan Credit Card?

KCC provides a revolving credit facility to farmers, similar to a credit card for personal use. Once a KCC is issued with a credit limit, the farmer can draw funds multiple times throughout the year for crop cultivation, post-harvest expenses, allied activities, and consumption needs.

The KCC is linked to a savings account and functions like an overdraft or cash credit facility.

Eligible Activities

KCC covers:
– Crop cultivation expenses (seeds, fertilisers, pesticides, labour)
– Post-harvest expenses and maintenance
– Allied activities: horticulture, fisheries, animal husbandry
– Working capital for farm asset maintenance
– Consumption requirements of the farmer family

Interest Rate and Subvention

The base interest rate on KCC is 9%. However, the central government provides a 2% interest subvention (subsidy) to banks, and prompt-paying farmers get an additional 3% incentive subvention. This means a farmer who repays on time effectively pays only 4% interest per year, making KCC one of the cheapest formal credit options for agriculture.

Credit Limit Calculation

The KCC limit is calculated based on:
– Cropping pattern (kharif and rabi crops)
– Scale of finance per crop per unit area
– Number of crop seasons per year
– Post-harvest and other eligible expenses

The limit is enhanced each year to account for crop cost escalation.

Eligibility

– Individual farmers: owner cultivators, tenant farmers, sharecroppers, oral lessees
– Joint liability groups of farmers
– Self-help groups of farmers

Digital KCC

The RBI has simplified KCC operations. Farmers can now apply online, and several banks offer digital KCC with top-up facilities through mobile banking. PM-KISAN beneficiaries are proactively offered KCC under a saturation drive.

Practical Example

Suresh, a paddy farmer, has a KCC with a credit limit of Rs 1.5 lakh. During the kharif season, he withdraws Rs 80,000 for seeds, fertilisers, and labour. After harvest, he repays the amount. During the rabi season, he again draws Rs 60,000. By repaying promptly, his effective interest rate is just 4% per annum, far lower than informal moneylender rates of 24% to 36%.

Key Takeaways

– Kisan Credit Card provides revolving credit to farmers at 4% effective interest (for prompt repayers)
– Covers crop cultivation, post-harvest expenses, allied activities, and consumption needs
– Credit limit is calculated based on the farmer’s cropping pattern and scale of finance
– Digital KCC issuance and PM-KISAN integration have expanded reach significantly
– KCC is one of the most impactful formal credit instruments for Indian agriculture