New Delhi: Farmers are forced to take out loans from lenders at high-interest rates because of poor harvests and failing agricultural seasons brought on by drought or unseasonal weather. As a response, the government introduced the Kisan Credit Card to offer loans to farmers at low-interest rates.
Rural clients, particularly farmers, must physically visit a bank branch with papers showing their ownership of the land in order to secure lending and funding. From the time a loan application is made until funds are disbursed, the Turn Around Time (TAT), which varies from two to four weeks, has also been fairly protracted.
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Who is eligible
The following entities are eligible for the KCC, according to the RBI’s master circular on the Kisan Credit Card scheme:
Farmers are sole or joint cultivators who are solo or joint borrowers.
Share croppers, tenant farmers, and oral lessees.
Tenant farmers, share croppers, and other types of farmers can form self-help groups (SHGs) or joint liability groups (JLGs).
Kisan Credit card features
Following are the key features listed on the SBI Bank website.
Type of Facility: Revolving cash credit account. Credit balance in the account, if any, will fetch interest at Savings bank rate.
Quantum of Loan: Need Based finance considering cropping pattern, acreage and Scale of Finance (SOF).
Margin: Nil
Moratorium: NA
Repayment: The repayment period as per the crop period (Short/ Long) and marketing period for the crop.
Security:
Primary: Hypothecation of Crops grown / assets to be created out of Bank finance.
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Collateral: Equitable mortgages or registered mortgages of real estate or personal property, as appropriate, on the whole amount of the loan For KCC limits up to Rs. 1.60 lakh and up to Rs. 3 lakhs, however, in cases of tie-up agreements, collateral is waived.
Interest Subvention: Prompt borrowers would receive a 3% annual interest subsidy on loans up to Rs. 3.00 lakhs.
Tenure: 5 years, with 10% annual increase of limit every year, subject to annual review.
Rupay debit cards for all eligible KCC borrowers.
Insurance:
a. Eligible crops may be covered under PRADHAN MANTRI FASAL BIMA YOJNA (PMFBY) on premium payment.
b. Borrower should also opt for Personal Accident Insurance, Health Insurance (wherever applicable).
Advantages of obtaining a Kisan Credit Card
These are the advantages, per the HDFC Bank website.
For bank cash withdrawals, a passbook is issued.
A cheque book with a 25,000 rupee credit limit was issued.
With the loan amount, a farmer can buy seeds, fertiliser, and farm machinery.
Low interest rates at banks, often around 9%.
a 3 lakh rupee credit limit maximum.
Farmers with good credit scores are given a higher credit limit.
Farmers with strong credit scores can receive discounts on borrowing rates.
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Applying for a Kisan Credit Card
People who are interested should go to the bank and fill out the necessary paperwork with their information. According to HDFC Bank, “Before sanction, bank will check applicant’s credit score.” The applicant’s land holdings, crop history, income, etc. will all be investigated by the bank.
Kisan Credit Card Digitalization
The Reserve Bank Innovation Hub (RBIH), in collaboration with the RBI, is implementing a pilot project as part of this drive to fully digitise Kisan Credit Card (KCC) loans from beginning to finish.
According to the Reserve Bank of India press release, “The pilot project would entail automation of various processes within banks and integration of their systems with the service providers. The proposed digitalisation of the KCC lending process will make it more efficient, reduce costs for borrowers and reduce TAT significantly.”
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The pilot will debut in a few districts of Madhya Pradesh and Tamil Nadu in September 2022 with Union Bank of India and Federal Bank, respectively, serving as partner banks and actively collaborating with the state governments. Based on the insights gathered from the trial, the digitalization of KCC lending will eventually be expanded to more districts in these two states.
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