Kisan Credit Card: Farmers Income to Rise 35% by Revisiting KCC Norms

Amid the intensifying farmer's protest against the government's agricultural laws, the latest State Bank of India (SBI) Ecowrap report has suggested a slew of measures to resolve the standoff, including revisiting the current KCC scheme norms to increase farmers' monthly income. As per the SBI Ecowrap, the monthly income of farmers will go up by a sharp 35 percent by just revisiting the current Kisan Credit Card (KCC) norms.

"As our model calculations, for a loan of Rs 1 lakh and with Rs 1.5 lakh Group Insurance cover (150% of loan), the monthly repayment will be Rs 533 only (or Rs 18 per day). We believe that the monthly income of farmers will go up to Rs 12,825 by the end of one year from the current level of Rs 9,500, simply by revisiting the current KCC norms," said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

As per the SBI report, a combination of revolving credit (say, share 40%) and term loan (60%) with the flexibility of payment could be introduced in lieu of the current KCC scheme.

The credits in the revolving limit, equivalent to at least the interest, can be debited during the year, while the term loan principal is to be repaid over 15 years (180 months) and interest (simple, not compounded), it said.

According to SBI reports, the RBI, in collaboration with the government, should create operational flexibility in the structure of KCC and direct banks to assign a set percentage of their loans to, notably agri start-ups, in order to enhance India's agri supply chains.

The cumulative capital inflow into this industry up to 2019 amounted to Rs 15,000 crore, and this trend has continued in a pandemic.

The Centre has pushed banks to provide KCC to all the 11.39 crore PM-KISAN beneficiaries in a bid to provide universal access to concessional institutional credit. During February-April 2020, banks have received 75 lakh KCC applications, and 36 lakh KCCs have been issued.

At the end of March 2020, the KCC loans for scheduled commercial banks aggregated to about Rs 7.09 lakh crore to 6.7 crores active KCC card users, which constitute about 40% of the total agricultural loans given by them. 

1.7 crore KCC holders with a credit limit of about Rs 1.54 lakh crore have been covered:

As per recent data released by the Ministry of Finance, 1.7 crore KCC holders with a credit limit of about Rs 1.54 lakh crore have been covered under the special saturation drive for farmers under the Rs 20.97 lakh crore Atma Nirbhar Bharat Package.  

However, the KCC portfolio of banks has come under increasing stress over the years due to a variety of factors like crop losses, unremunerated prices, debt waivers, and the rigidity of the KCC product.

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