ROLE OF KISAN CREDIT CARD IN RURAL AND AGRICULTURE DEVELOPMENT

ABSTRACT

Kisan Credit Card

It was started by the Government of India, Reserve Bank of India (RBI), and National Bank for Agriculture and Rural Development (NABARD) to help farmer’s access timely and adequate credit.

KCC scheme was introduced in the Banks in August 1998.The aim of Kisan CREDIT CARD Scheme (KCC) is to provide adequate and timely support from the banking system to the farmers for their short-term credit needs during their cultivation for purchase of inputs etc. ,during the cropping season.

Beneficiaries covered under the Scheme are issued with a credit card and a passbook or a credit card cum passbook incorporating the name, address, particulars of land holding, borrowing limit, validity period, a passport size photograph of holder etc., which may serve both as an identity card and facilitate recording of transactions on an ongoing basis.

Borrower is required to produce the card cum passbook whenever he/she operates the account

Institutional credit, which played a very important role in the development of agricultural sector, was instrumental in development of Indian agriculture.

KCC holders are covered by a personal accident insurance. This cover is available when the person enters the scheme. The cover is as follows: Death: `50, 000 Disability: ` 25000 Maximum Age to enter: 70years.

As a pioneering credit delivery innovation, Kisan Credit card Scheme aims at provision of adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner. Beneficiaries covered under the Scheme are issued with a CREDIT CARD and a pass book or a credit card cum passbook which may serve both as an identity card and facilitate recording of transactions on an ongoing basis.

Keywords: KCC, Agriculture, NABARD, Insurance, Formers

INTRODUCTION

   

A Kisan Credit Card is a CREDIT CARD to provide affordable credit for farmers in India.

It was started by the Government of India, Reserve Bank of India (RBI), and National Bank for Agriculture and Rural Development (NABARD) in 1998-99 to help farmer’s access timely and adequate credit.

The Kisan Credit Card allows farmers to have cash credit facilities without going through time-consuming bank credit screening processes repeatedly. Repayment can bare scheduled if there is a bad crop season, and extensions are offered for up to four years. The card is valid for three years and subject to annual renewals. Withdrawals are made using lips, cards, and a passbook

Agriculture continues to be an important sector of the economy with 18 percent share in the Gross Domestic Product(GDP), provides employment to nearly 2/3^rd of the work force in the country. Agriculture at present has undergone a significant shift from the subsistence level of production to market oriented production. The much needed food security is reflected in the        abundant buffer stocks of grains build up out of the surplus production. It enabled the farmer to go for short-term credit for purchase of inputs and other services and the long-term credit for investment purposes. Thus, credit played an important role by facilitating technological up-gradation and commercialization of agriculture. The success of Green Revolution in Indian agriculture to a large extent laid on institutional credit support to agricultural sector in terms of expansion in inputs like fertilizers, irrigation, private capital formation, etc.

The aim of Kisan CREDIT CARD Scheme (KCC) is to provide adequate and timely support from the banking system to the farmers for their short-term credit needs during their cultivation for purchase of inputs etc., during the cropping season. Credit card scheme proposed to introduce flexibility to the system and improve cost efficiency. This scheme was announced in Budget speech of FINANCE Minister in 1998-99 (Yashwant Sinha was India’s FINANCE Minister, in the NDA Government) In the speech it was stated that NABARD would formulate a Model scheme for issue of Kisan Credit Cards to farmers, on the basis of their landholdings, for uniform adoption by banks, so that the farmers may use them to readily purchase agricultural inputs such as seeds, fertilizers, pesticides, etc. and also draw cash for their production needs.

Beneficiaries covered under the Scheme are issued with a CREDIT CARD and a pass book or a credit card cum passbook which may serve both as an identity card and facilitate recording of transactions on an ongoing basis

Objectives

^•          Cover age and financial support to the farmers in the event of failure of crops as a result of natural calamities, pests and diseases.

^•          To encourage farmers to adopt progressive farming practices, high value inputs and higher technology in agriculture.

^•          To help stabilise farming comes, particularly in disaster years.

^•          To support and stimulate primarily production of food crops and oil seeds.

^•          Farmers to be covered: All farmers (both loan and non-lone irrespective of their size of holdings) including share croppers, tenant farmers growing insurable crops covered.

^•           Sum insured: The sum insured extends up to the value of threshold yield of the crop, with an option to cover up to 150% of average yield of the crop on payment of extra premium.

^•          Premium subsidy : 50% subsidy in premium allowed to Small and Marginal

Farmers, to be shared equally by the Government of India and State

Government/Union Territory. Premium subsidy to be phased out over a period of 5years.

Advantages to the Farmers

^•          Simplifies disbursement procedures

^•          Removes rigidity regarding cash and kind

^•          No need to apply for a loan for every crop

^•          Assured availability of credit at any time enabling reduced interest burden for the farmer.

^•          Helps buy seeds, fertilizers at farmer's convenience and choice

^•            Helps buy on cash-avail discount from dealers

^•          Credit facility for 3years–no need for seasonal appraisal

^•          Maximum credit limit based on agriculture income

^•          Any number of withdrawals subject to credit limit

^•          Repayment only after harvest

^•          Rate of interest as applicable to agriculture advance

^•          Security, margin and documentation norms as applicable to agricultural advance

^•          Access to adequate and timely credit to farmers

^•          Full year's credit requirement of the borrower taken care of. Minimum paper work and simplification of documentation for withdraw of funds from the bank.

^•          Flexibility to draw cash and buy inputs.

^•          Assured availability of credit at any time enabling reduced interest burden for the farmer. Flexibility of drawals from a branch other than the issuing branch at the discretion of the bank.

Salient Features

^•          Eligible farmers to be provided with a Kisan Credit Card and a passbook or card cum-passbook.

^•          Revolving cash credit facility involving any number of drawals and repayments within the limit.

^•          Limit to be fixed on the basis of operational land holding, cropping pattern and scale of finance.

^•          Entire production credit needs for full year plus ancillary activities related to crop production to be considered while fixing limit.

^•          Sub-limits to cover short term, medium term as well as term credit are fixed at the discretion of banks.

^•          Card valid for 3 to 5years subject to annual review. As incentive for good performance, credit limits could be enhanced to take care of increase in costs, change in cropping pattern, etc.

^•          Each drawal to be repaid within a maximum period of 12 months.

^•          Conversion/ reschedulement of loans also permissible in case of damage to crops due to natural calamities.

^•          Security, margin, rate of interest, etc. as per RBI norms.

^•          Operations may be through issuing branch (and also PACS in the case of Cooperative Banks) through other designated branches at the discretion of bank.

^•          Withdrawals through slips/ cheques accompanied by card and passbook.

^•          Crop loans disbursed under KCC Scheme for notified crops are covered under Rashtriya Krishi Bima Yojna (National Crop Insurance Scheme), a crop insurance scheme introduced at the behest of Government of India to protect the interest of the farmer against loss of crop yield caused by natural calamities, pest attacks etc.

Kisan Credit Card

Beneficiaries covered under the Scheme are issued with a credit card and a passbook or a credit card cum passbook in corporating the name, address, particulars of land holding, borrowing limit, validity period, a passport size photograph of holder etc., which may serve both as an identity card and facilitate recording of transactions on an ongoing basis.

Borrower is required to produce the card cum passbook whenever he/she operates the account

Personal Accident Insurance Scheme

Scheme covers risk of KCC holders against death or permanent disability resulting from accidents caused by external, violent and visible means, as under: Death due to accident (within 12months of the accident) caused by outward, violent and visible means-Rs.50,000/-Permanent total disability--Rs.50,000/-Loss of two limbs or two eyes or one limb and one eye--Rs.50,000/-Loss of one limb or one eye--Rs.25,000/-

^•          Nominated office of insurance company to issue a Master Insurance Policy to each DCCB/RRB covering all its KCC holders.

^•          Premium payable Rs.15/-for a one year policy while Rs.45/-for a 3-year policy.

^•          Designated insurance company will nominate one office at district level to function as nodal office for co-coordinating implementation of personal accident insurance scheme for KCC holders in the district.

^•          Insurance coverage available under Policy only from date of receipt of premium at insurance company

^•          Banks to ensure to incorporate name of Nominee in Kisan Credit Card-cum-Pass Book.

^•          Simplified claim settlement procedure evolved under Scheme where by an Enquiry -cum-Verification Committee comprising Branch Manager of implementing bank, Lead Bank Officer and representative of insurance company to certify nature of accident causing disability/death and recommend settlement of insurance claims.

Government Support to KCC Holders

KCC holders have been covered under Personal Accident Insurance Scheme against accidental death or permanent disability, up to maximum amount of Rs.50000/-and Rs. 25000/-respectively. The premium burden will be shared by the card issuing   institutions and the borrower in the ratio of 2:1.

^•          Bankers were also advised to issue KCC to tenant farmers/ share croppers /oral lessee/Joint liability groups.

^•          Banks were advised to cover all eligible farmers under KCC scheme.

^•          With a view to make the scheme more effective at ground level and serve the farmers in the way in which it was expected to do, GOI had constituted a high Level Task Force which shall inter alia examine and suggest measures for improving efficiency of KCC scheme. There port from task force has been submitted to GOI on 30 June 2010.

^•          As desired by Honourable Finance Minister, bankers were advised to increase KCC coverage by 20% in number and also in amount during the financial year 2010-11 over the year 2009-10. Similar increased coverage is expected during 2011-12.

Major steps taken by NABARD

^•          Co-op Banks and RRBs were advised to enlarge the scope of the KCC Scheme to cover term loans for agriculture and allied activities, including a reasonable component to meet the consumption needs, besides the existing facility of providing crop loan limit.

^•          The coverage of KCC was extended to landless labourers, oral lessees, tenant farmers including defaulters.

^•          The concept of KCC has been extended to the borrowers of the long term cooperative structure.

^•          A Brochure on KCC Scheme highlighting the salient features, advantages and other relevant information about the Scheme was brought out by Head Office and

RO s were asked to circulate the brochure to State govt. departments, Commercial Banks, Cooperative Banks, RRBs and other concerned agencies/officers so as to generate wider awareness about the Scheme.  Minimum Floor limit of Rs.5000/-for issue of KCC stands withdrawn.

^•          Studies on KCC Scheme have been conducted by NABARD periodically to facilitate feedback on the ground level issues/problems so that changes, where necessary, could be considered.

^•          On the lines of instructions of RBI to Commercial Banks, Cooperative Banks and RRBs have been advised that they may, at their discretion, pay interest at a rate based on their perception and other relevant factors on the minimum credit balances in the cash credit accounts under the Kisan Credit Cards of farmers during the period from 10th to the last day of each calendar month.

^•          RRBs were advised to initiate innovative publicity campaign in each area of operation in order to cater all eligible farmers under KCC.

Progress in Implementation of the Scheme

^•          Since launching in August 1998, around 10 crore live Kisan Credit Cards were issued upto 31^st March 2013 by Cooperative Banks, Regional Rural Banks and Commercial Banks put together.

^•          Scheme implemented in all States and Union Territories (except Chandigarh, Daman & Diu and Dadra & Nagar Haveli) with all Cooperative Banks, RRBs and Commercial Banks participating.