RBI proposes Kisan Credit Card revamp: Key changes explained

KCC

• RBI plans major revamp of Kisan Credit Card scheme for broader farm sector reach
• KCC tenure to be extended to six years, with updated guidelines for banks
• New rules to include tech expenses and standardise crop season definitions

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The Reserve Bank of India (RBI) has proposed a major overhaul of the Kisan Credit Card (KCC) scheme, aiming to widen its reach, simplify operations and align it with the evolving credit needs of the farm sector and allied activities.

RBI’s proposal on KCC: what has been announced

As part of its developmental and regulatory policy measures announced after the Monetary Policy Committee (MPC) meeting, the RBI said it has completed a comprehensive review of the KCC scheme. The review focuses on expanding coverage, streamlining operational processes and addressing ‘emerging requirements’ in agriculture and allied sectors.

The central bank plans to issue a revised set of instructions to banks, consolidating all existing guidelines on KCC for agriculture and allied activities into a single, updated framework.

Key elements of the proposed guidelines include:

• Standardisation of crop season: A uniform approach to defining crop seasons across regions, which will help bring consistency in assessment of credit needs and repayment timelines.

• Extension of KCC tenure to six years: The overall tenure of KCC facilities will be extended to six years, providing farmers a longer and more predictable credit relationship with their banks.

• Alignment of drawing limit with Scale of Finance (SoF): The drawing limit under KCC will be aligned with the Scale of Finance for each crop season, ensuring limits are better indexed to actual costs of cultivation.

• Inclusion of technological intervention expenses: The eligible purposes under KCC will formally include expenditure on technological interventions, such as modern equipment, precision farming tools or other agri-tech solutions.

The RBI has stated that the draft guidelines incorporating these changes will be issued shortly.

What is Kisan Credit Card scheme

Kisan Credit Card was launched in 1998, based on a model scheme developed by the National Bank for Agriculture and Rural Development (NABARD), to meet the diverse credit needs of the agriculture sector by providing timely financial support to farmers.

Objective of KCC

The Kisan Credit Card scheme is designed to ensure timely and adequate credit from the banking system through a single-window facility, offering farmers flexible and simplified access to funds for cultivation and other related needs as indicated below :

To meet the short-term credit requirements for the cultivation of crops;

Post-harvest expenses;

Produce marketing loan;

Consumption requirements of the farmer household;

Working capital for maintenance of farm assets and activities allied to agriculture;

Investment credit requirement for agriculture and allied activities.

Eligibility

Farmers - individual/joint borrowers who are owner-cultivators.

Tenant farmers, oral lessees & share croppers.

Self Help Groups (SHGs) or Joint Liability Groups (JLGs) of farmers, including tenant farmers, share croppers, etc.