Expansion of Kisan Credit Card issuance would boost tech usage in agriculture, say experts

Experts said that lending to the agriculture sector always needs a cautious approach as it has higher chances of turning non-performing assets (NPAs).

The Union Finance Ministry's decision to expand the launch of the Jan Samarth-based Kisan Credit Cards to five more states will lead to more tech usage in the segment, voices from the industry said. The decision was announced by Finance Minister Nirmala Sitharaman while presenting the full Budget 2024 on July 23.

Seema Prem, co-founder and CEO, FIA Global, said that KCCs will empower farmers and the rural economy. “Issuance of Kisan Credit Cards will empower farmers to efficiently manage their agricultural needs, which will benefit our rural economy and further all-round development,” Prem said.

SK Chaudhary, Founder Director, Safex Chemicals, said the Union Budget is quite progressive for the agriculture sector and KCC alongside the establishment of a Digital Public Infrastructure (DPI) for agriculture will revolutionise farming is approached. “Digital crop surveys and the issuance of KCC under the Jan Samarth initiative will pave the way for a tech-enabled agricultural landscape,” Chaudhary said.

KCC was introduced in 1998 for the issue of the cards to farmers on the basis of their holdings for uniform adoption by banks so that farmers may use them to readily purchase agriculture inputs such as seeds, fertilizers, pesticides, etc., and draw cash for their production needs. The scheme was further extended for the investment credit requirement of farmers viz. allied and non-farm activities in the year 2004.

KCC numbers

The total outstanding amount under the KCC scheme rose to Rs 8.85 lakh crore in 2023 from Rs 8.13 lakh crore in 2022 and Rs 7.53 lakh crore in 2021, according to Reserve Bank of India (RBI) data. In terms of the number of cards, total KCCs by the end of 2023 stood at 7.35 crore, up from 7.13 crore in 2022. In percentage terms, the total outstanding amount increased by 9 percent in 2023, compared to an aggressive 20 percent in 2022.

Experts said that lending to the agriculture sector always needs a cautious approach as it has higher chances of turning into non-performing assets (NPAs). A loan is declared an NPA when there is no payment of interest or principal for 90 days.

Anand Duma, Senior Analyst, BFSI, Emkay Global Financial Services, had said that NPAs in the agri-loan portfolio of banks could rise worryingly due to extreme weather changes. “It has been observed that weather changes have affected farm production; consequently, there has been a rise in agri-NPA numbers."