Kisan Credit Card – Rendering Financial Support to Farmers

The Kisan credit card aims to provide formal credit to the farmers and avail of low-interest credit. The credit holders under the Kisan credit card will be covered under the personal accident insurance up to Rs. 50,000 for death and permanent disability and up to Rs. 25,000 for other risks. The premium borne by the borrower and bank will be in the ratio of 2:1. With an option to extend the scheme for up to three more years, the validity period of the Kisan credit card will be for 5 years.

Agriculture is the largest source of livelihoods in India with almost 70% of the rural population is primarily dependant on agriculture. The farmers in India are the food provider and they play a major role in contributing 18% to the GDP and diversifying the economy. Farmers are the men who work in the searing heat and bitter cold to put food on our tables. Despite being the backbone of the Indian economy, 82% of the farmers are still small and marginal. Due to this the agricultural credit is one of the basic inputs for conducting all the agricultural development programs.

Indian farmers being poor, there is an immense need to provide proper agricultural credit. From time immemorial, the major source of agricultural credit in India was money lenders. The Indian Government post Independence has adopted an institutional credit approach through various agencies like the commercial banks, cooperative banks, regional and rural bans, etc, to provide an adequate amount of credit to the farmers, at low rates and interest. Moreover, with the growing modernization of agriculture and technological advancement, the requirement of agricultural credit has increased more in recent years.

Background of the Kisan Credit Card

The Kisan credit card scheme was launched in the year 1998 which was prepared by the National Bank for Agriculture and Rural Development (NABARD) on the recommendations of the R.V.Gupta Committee to provide term loans for the agricultural needs. It aims to give financial support to the farmers to meet the comprehensive credit requirements of the agricultural sector, fisheries, and animal husbandry.

The timeline of agricultural credit can be traced back to the early twentieth century. To provide affordable credit to the farmers, the Agricultural Credit Department was set up in the Reserve Bank of India, through the RBI Act, 1934. But it failed to sustain due to the overburden of delays in repayment of the credits. On the recommendations of the All India Rural Credit Committee, the commercial banks were also enrolled to provide credit to the farmers. This new mandate further strengthened after the nationalization of commercial banks in 1969.

The concessional interest rates to people below the poverty lines were introduced in the year 1972 and the demarcation of agricultural and weaker sections was done in the year 1980. The small farmers were categorized under ‘weaker sections’ as the beneficiaries under the category of ‘agriculture’.  This endeavor has brought positive effects in increasing access to agricultural credit.

The conventional method of credit system was replaced by the Kisan credit card scheme. It is a mechanism to aid the farmers to access timely and adequate credit from the banking sector for the cultivation of crops, marketing requirements, post-harvest needs, maintenance of their farms, and financial assistance for purchasing the high-value agricultural assets. The credit offered to the farmers in the scheme will be of two types viz, 1. Cash -credit, 2. Term-credit.

Features of Kisan Credit Card

1. The insurance coverage under the Kisan credit scheme will protect against the losses incurred by the farmers against natural calamities, pest attacks, etc.
2. For the loan up to Rs. 1.60 lakh, no collateral loans will be required.
3. The interest charged upon the credit will be simple. Such interest will be charged for 1 year or up to the re-payment due date whichever is earlier.
4. The Kisan credit card will also be an ATM cum debit card for all the borrowers.
5. The assessment of the loan amount for the first year will be based on the cost of cultivation, post-harvest expenses, and the cost of maintaining the farm.
6. The extension of loans for the next five years will be based on the increase in the scale of finance.
7. The objective of the Kisan credit card is to help the farmers by providing easy credit to meet the financial requirements related to agriculture and the allied sector.
8. The interest charged in case the payment is not made in the due date will be based on half-yearly compounding for the re-payment.
9. The conversion and rescheduling of the loans are permissible, in case the crop gets damaged due to natural calamities.
10. The credit limit of the farmer can be increased if the farmers have a good credit record and there is a change in the cropping pattern, or an increase in the operation cost, and the credit limit.
11. The cardholders in addition to the Kisan credit card will also be issued a smart card cum debit card.
12. The yearly review will be done by the respective banks, to determine the validity of the Kisan credit cards.
13. The facility of revolving credit will be available for any amount of withdrawals and repayment made throughout the year.

Benefits of Kisan Credit Card

1. The disbursement of the credit to the farmers is a hassle-free process.
2. The rate of interest on the Kisan credit card is at a very low rate.
3. The interest rate of the savings bank will be provided to maintain the credit balance in the Kisan credit card account.
4. The Kisan credit card aims to provide single credit or term loan facility to meet all the agricultural and ancillary needs of the farmers.
5. It will provide a facility of flexible re-payment alternatives to the cardholders.
6. The scheme will aid the farmers to purchase the fertilizers, seeds, etc, and to avail the discount from the dealers or merchants.
7. Due to the easy availability of credit to the farmers, the dependency on informal credit sources or money lenders will decrease.
8. Within the credit limit of the cardholders, there will be no restriction on cash withdrawals.
9. Minimal documentation and maximum flexibility are associated with the withdrawal of the required funds from the issuing bank.
10. To improve the banker-client relationships.
11. To improve the recovery of loans and better recycling of funds.
12. To reduce the burden on the branch staff by avoiding repeated appraisal and processing of loan papers.
13. To reduce the load of interest on farmers and provide assured availability of loans.

Eligibility of Kisan Credit Card

The eligibility criteria of the Kisan credit card are as following:

1. At the time of applying for the Kisan credit card scheme, the age requirement needs to between 18 to 60 years.
2. The individual or group of people applying for the Kisan credit card should own agricultural land.
3. The land which is considered for the Kisan credit card has to be agriculturally active and must be crop generating.

The eligibility criteria for fisheries and animal husbandry under the Kisan credit card scheme are as following:

1. The person eligible for the scheme includes fish farmers, fishers, SHGs, JLGs, and women but they must own or lease any activity related to the fisheries.
2. The applicant must own a registered fishery boat or any other fishing vessel and must also have obtained necessary permission for fishing in sea or estuary.
3. The applicant applying for the Kisan credit card can be a farmer, a tenant farmer, SHGs, JLGs, and dairy farmers who either owns or lease or rent sheds.

Interest Rate of Kisan Credit Card

The interest charged on the short term loans to the farmers will be 4% on the condition of timely repayment of the loan. The interest, however, can be reduced by up to 3% based on the discretion of the bank and prompt re-payment of the loan by the farmers.

The maximum limit of the Kisan credit card varies from each bank which will be based on the estimated income of the farmer, the harvesting, and the cultivation pattern of the crops.

Documents for Kisan Credit Scheme

The farmers are required to furnish the identity and address proof to get a Kisan credit card. The approved documents for this purpose are as following:

1. Identity Proof- voter ID, passport, PAN card, Person of Indian origin card, Job card issued under MNREGA, Letter issued by UIDAI, Aadhaar Card, driving license.
2. Address Proof- Ration card, Passport, Person of Indian Origin Card, property registration document, job card issued under MNREGA, Aadhaar card, driving license, bank account statement or passbook, utility bills like electricity bill or water bill.

How to Apply for a Kisan Credit Card

Following are the steps to apply online for the Kisan credit card-

1. Visit the official website of the bank through which one has to apply for the Kisan credit card.
2. Find the option of the ‘Kisan credit card’ under agricultural products or services.
3. Click on the ‘Apply’ button.
4. Fill the form with all the required information, and click on the ‘submit’ option.
5. After submitting the application form, a reference number will be provided for further queries.

Banks which Offer the Kisan Credit Card

The Kisan credit cards can be obtained from all the cooperative banks, regional rural banks, and public sector banks. Any farmer, tenant, crop sharer in India can avail of the benefits of this scheme.

NPCI– The National Payments Corporation in India offers Rupay Kisan credit cards as a part of its domestic card scheme for multi-lateral payments.

NABARD– NABARD will offer term loans and easily accessible credit to the farmers.

SBI– The State Bank of India provided flexible financial support to the farmers at low interest.

IDBI– The IDBI provides the Kisan credit card to farmers together with the investment credit, crop loans, and working capital to meet the agricultural expenses.

Thus, above are the top banks which offer credit facility under the Kisan credit card scheme to help them carry out agricultural activities smooth and steady.

An Overview

To improve the productivity of farmers’ land at Rubby and Kharif seasons and to assist the farmers with the required credit, the Kisan credit card scheme is playing a significant role in increasing the productivity of the agricultural sector of India. Any registered cultivator in need of the credit can apply for the scheme at lesser rates of interest.

 The Reserve Bank of India under the Kisan credit card scheme has initiated the guidelines and made some changes for the welfare of the cultivators. The Finance Ministry to provide the credit loans to the livestock breeding and fisheries workers have made some change to increase the development in the agricultural sector and improve the standard of living of farmers.

To avoid stepping into a debt trap associated with the informal borrowings of the farmers, the Indian Government in June 2019 intends to reach out to one crore farmers in 100 days through the Kisan Credit Card Scheme. The move of the government will provide direct benefits to the farmers and ease the pressure on them.

Conclusion

 The Kisan credit card scheme is being implemented to simplify the credit delivery system and to provide timely loans to the farmers for agricultural production in a cost-effective way. This scheme has become a landmark in the history of the rural credit system in India and to outreach and expand the banks and simplify the credit delivery system. We cannot deny the importance of focusing the credit on the small farmers in rural distress and migration. However, the fragmentation of the landholdings and tenancy are the factors that need to be addressed by the government which can be solved by encouraging the consolidation of the landholdings. Aatmnirbhar Sena is here to familiarize the farmers with the concept of the Kisan Credit Card scheme.

The ambitious target of the Prime Minister to double the farmer’s income by 2022 and to expand the economy to a five trillion dollar by 2024 can be achieved by improving the access to institutional finance at competitive rates. This can help in reducing the burden of financing activities like buying seeds, fertilizers, and pesticides.

The Reserve Bank of India has made few recommendations to make formal banking more inclusive in the rural areas and to push the States to digitalize and update their land records which will ease the lending to small and marginal farmers.  To ensure transparent land transactions, digital titles are required. Thus, we can say that there is a positive relationship between agricultural growth and agricultural credit. A farmer must sustain a good crop cycle based on quality inputs that can be achieved by giving access to affordable institutional credit. The agricultural credit lays a very crucial role in providing them with essentials at the time of adversaries and to absorb the shock of crop failure due to various reasons.