Banks and financial institutions run various schemes to provide economic support to agriculture and allied activities in India. Among these, the Kisan Credit Card (KCC) scheme is the most significant and popular. Launched by public sector banks in August 1998, this scheme provides farmers with timely credit—or loans—at low interest rates to meet their agricultural needs. Initially, its primary objective was to cover expenses related to seasonal crops; however, over time, its scope has expanded to include activities such as dairy farming, poultry, fisheries, animal husbandry, and beekeeping.

How does the Kisan Credit Card provide very low-cost loans?

The key features of the Kisan Credit Card are the very low interest rates and government subsidies offered on it. Under the Government of India's modified interest subvention scheme, banks receive support to provide loans at an interest rate of 7% per annum on total loan amounts of up to ₹3 lakh. Farmers who repay their loans on time receive an additional interest subvention (rebate) of 3% from the Central Government. Consequently, farmers who repay on time effectively secure loans at a low rate of 4% per annum. This interest subvention is calculated for a maximum period of one year, starting from the date of loan disbursement or withdrawal up to the actual date of repayment or the due date fixed by the bank (whichever is earlier).

Who can apply?

Farmers and animal husbandry practitioners from all sections of society can avail the benefits of the Kisan Credit Card scheme. The categories of eligible applicants under the scheme are listed below:

Individual/Joint Landowners: Farmers who cultivate their own land.

Lessees and Sharecroppers: Tenant farmers, oral lessees, and sharecroppers.

Groups and Entities: Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) comprising farmers, lessees, or sharecroppers. Farmers engaged in allied activities: Individuals involved in animal husbandry, dairy farming, fisheries, beekeeping, sericulture, mushroom cultivation, and other related activities.

As per government regulations, linking bank accounts with Aadhaar is mandatory to avail the benefits of the revised interest subvention under the KCC scheme.

KCC Loan Limit and Available Funds

The loan limit under the KCC scheme is determined based on the farmer's landholding, crop type, and associated activities. Fund limits are also defined within the scheme. A maximum credit limit of ₹3 lakh is set for crop cultivation and post-harvest expenses. A limit of up to ₹2 lakh is available as working capital for activities such as animal husbandry, dairy farming, fisheries, sericulture, and beekeeping. Marginal farmers with landholdings of up to 1 hectare are provided a 'Flexi KCC' ranging from ₹10,000 to ₹50,000; this limit is set for five years to cover cultivation expenses, household needs, and the purchase of small equipment, without being linked to the land's value.

How are the Credit Limit and Loan Amount Assessed?

The KCC loan limit is fixed for five years and operates as a revolving credit limit. The limit for the first year is determined using the following formula:

First-year limit = (Scale of finance for the crop as determined by the District Level Technical Committee × Cultivation area) + (10% of the limit for post-harvest/household needs) + (20% of the limit for repair and maintenance of farm assets) + Crop/Accident insurance premium.

Limits for the second to fifth years: The limit is increased by 10% annually (for the 2nd, 3rd, 4th, and 5th years) to account for cost escalation.

Term Loan: A term loan component is also included for five years to cover expenses such as land development, irrigation, and the purchase of agricultural equipment. The maximum permissible limit for the card is determined by combining the fixed short-term limit for the fifth year and the total term loan amount.

Key features and uses of KCC credit:

The Kisan Credit Card (KCC) scheme addresses the diverse needs of farmers through a single facility. For short-term crop requirements, it can be utilized for the cultivation of seasonal crops, vegetables, fruits, flowers, plantation crops, spices, and medicinal plants. It also covers post-harvest expenses and facilitates loans against e-NWRs (Electronic Negotiable Warehouse Receipts). Additionally, an interest subvention facility for the first year is provided for the restructuring of crop loans for farmers affected by natural calamities.

Furthermore, to prevent small and marginal farmers from being compelled to sell their produce at low prices immediately after harvest, the scheme supports the use of receipts for produce stored in warehouses registered with the Warehousing Authority.