Kishan Credit Card (KCC) scheme was introduced in the budget for the year 1998 by then finance minister Mr Yashwant Sinha and it was implemented in the month of August of the same year. Kishan Credit Card scheme was introduced to provide short-term credit to farmers on the basis of their land holdings so that farmers can purchase required inputs on time such as seeds, fertilizers, pesticides etc. This helps small and marginal farmers to avoid the route of very high-interest loans from the unorganized sector to meet their need of working capital and input costs.
Before giving loans to farmers, a credit limit is assigned to them depending upon the landholding, crops sown etc and an ATM-cum credit card is provided to him/her to use it to withdraw cash, to pay at Point of Sale (PoS) terminal while buying seeds, fertilizers, pesticides etc. At the end of the year, if the farmer pays his/her dues on time credit limit is increased by 10 per cent or it may be reduced depending upon the credit history of a farmer and other factors. Generally, a short-term crop is given for a year but it may be extended up to five years if the farmer keeps on paying interest regularly.
Kishan Credit Card Scheme is implemented by all the Commerical banks, Small Finance Banks, Regional Rural Banks, and Cooperative banks. Farmers (individual as well as joint farmers) who are owner-cultivators, tenant farmers, Self Help Groups (SHGs), Joint Liability Groups (JLGs) are eligible to take loans under the Kishan Credit Card scheme. While in the latest budget of 2018-19 Government of India has added dairy farmers and fisheries as eligible beneficiaries under the KCC scheme.
Objective or Purpose to Introduce the KCC scheme
The KCC scheme aims at providing adequate and timely credit support to farmers from the banking sector. The various objectives of the scheme are given as:
- To meet the short-term credit requirement for the cultivation of crops.
- For post-harvest expenses.
- For consumption requirement of farmer household.
- For working capital for the maintenance of farm assets and activities allied to agriculture.
- To produce marketing loans.
All the above components come within the short-term credit limit portion and if we add “Investment credit requirement for agriculture and allied activities” into above components it will form a long-term credit limit portion.
Interest Subvention under the KCC scheme
Interest Subvention is provided by Government of India for short-term crop loans of up to 3 lakh rupees payable within a year. After interest subvention, a farmer needs to pay 4 per cent of the interest (gets 5 per cent interest subvention) if he/she pays regularly on time, while if interest is not paid on time 7 per cent is charged after providing a subvention of just 2 per cent. In the budget 2018-19, the government has hiked institutional farm credit to 11 lakh crore rupees which are 1 lakh crore more than the previous year.
Interest Subvention is provided if a KCC loan is taken from a public sector bank, private sector bank, regional rural bank, small finance bank or a cooperative bank. Interest Subvention Scheme is implemented by RBI and NABARD.
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