Policy Update
Meyhar Kaur Walia
Background
The Kisan Credit Card (KCC) Scheme was introduced in August 1998 to provide term loans for the agricultural needs of farmers. The issuance of KCCs is based on farmers’ land holdings to ensure uniform adoption and enable them to easily purchase agricultural inputs such as seeds, fertilizers, and withdraw cash for production-related expenses. The model for the KCC scheme was developed by the National Bank for Agriculture and Rural Development (NABARD), in line with the recommendations of the RV Gupta Committee, and is available at all Indian banks, including regional rural and co-operative banks.
In 2004, the scheme was expanded to include investment credit for farmers, supporting allied activities such as dairy farming, fisheries, and non-farm activities like small businesses or other revenue-generating ventures outside of agriculture. On December 18, 2020, Prime Minister Narendra Modi launched a Revised Kisan Credit Card Scheme aimed at providing timely credit support through a simplified, single-window banking process for farmers’ cultivation and other needs.
Objectives
The Kisan Credit Card Scheme aims to meet the financial requirements of farmers for their agricultural needs and others:
- To provide short-term credit requirements for the cultivation of crops.
- To support post-harvest expenses, such as transportation and storage.
- Produce marketing loans.
- To meet the consumption requirements of the farmer’s household.
- Working capital, i.e. to maintain farm assets and activities allied to agriculture.
- To meet the investment credit requirement for agriculture and related endeavors.
Functioning
All farmers including small farmers, marginal farmers, sharecroppers, oral lessees, tenant farmers, and the Self-Help Groups (SHGs) or Joint Liability Groups (JLGs) are eligible for availing of the benefits of the KCC scheme. Under this scheme, farmers can procure collateral-free loans up to Rs 1.60 lakh. The amount of loan for the first year is assessed based on the cost of cultivation, post-harvest expenses, farm maintenance cost, etc and for the subsequent five years, the loan will be granted on the basis of how much additional funding is required for farming.
The scheme includes an insurance premium borne by both the bank and the borrower in a respective ratio of 2:1. The interest rate levied on the loan is around 7% simple interest per annum. In case of non-repayment within the due dates, the interest is applied at the card rate, i.e. the standard interest rate charged by the bank when repayments are delayed, and interest beyond the due date will be compounded half yearly.
The Government has extended financial benefits to animal husbandry and fisheries from 2018-19, offering a 2% subvention to banks and a 3% prompt repayment incentive to farmers on short-term loans up to Rs. 2 lakh at a 7% interest rate. Farmers possessing KCC for raising crops as well as in activities related to animal husbandry/fisheries are eligible for subvention on a total short-term loan of Rs 3 lakhs per annum. From 1 April 2020, these benefits will only be available on loans issued under the KCC scheme. Farmers under KCC also receive personal accidental insurance up to Rs 50,000 for permanent disability and death, and up to Rs 25,000 for other risks.
A farmer who wishes to apply for the KCC scheme requires mandatory documents and can either visit the bank branch to fill out the KCC form or apply online through the bank’s website. A simple one-page form has been created such that the basic data would be obtained from the bank’s record under PM KISAN, requiring only a few additional details, like land record and crops sown, to be filled. The form is available in all leading newspapers and it can also be downloaded from the websites of banks, the Department of Agriculture, and the PM-KISAN portal. Additionally, Common Service Centres (CSCs) are authorized to help beneficiaries complete and submit the form.
Performance
As part of the Atmanirbhar Bharat Package, the Government has announced a special saturation drive to cover 2.5 crore farmers under the Kisan Credit Card scheme, offering a credit boost of Rs 2 lakh crores. The scheme has successfully covered over 1.5 crore farmers, with an approved credit limit of ₹1.35 lakh crore. A flexible limit of Rs 10,000 to Rs 50,000 has been provided to marginal farmers based on the land holding, crops grown, post-harvest storage needs , and small-term loan investments, without linking it to the land’s value.
In the financial year 2024, nearly 11 million credit cards were operative under the Kisan Credit Card scheme in the state of Uttar Pradesh. This was followed by Maharashtra with over 7 million cards and Rajasthan with 6.8 million cards. In total, 77 million cards were active during the year. A total of 1.24 lakh KCCs and 44.40 lakh KCCs were issued to fisheries and animal husbandry activities, respectively. In the last ten years, Rs 1.44 lakh crore in interest subsidy has been released on Kisan Credit Card loans.
This amount has increased nearly 2.4 times, from ₹6,000 crore in 2014-15 to ₹14,252 crore in 2023-24. Institutional credit to agriculture has nearly tripled, from ₹8.5 lakh crore in 2014-15 to ₹25.48 lakh crore in 2023-24. Short-term agriculture credit has increased from ₹6.4 lakh crore to ₹15.07 lakh crore. The proportion of small and marginal farmers accessing loans grew from 57% in 2014-15 to 76% in 2023-24
Number of Kisan Credit Cards (KCC) across India in the financial year 2024
Source: Statista
Impact
The KCC Scheme has played a key role in strengthening the relationship between financial institutions and agricultural producers. The amount operative under KCC accounts has more than doubled from around Rs 4 lakh crores in 2014 to around Rs 10 lakh crores in 2024. This reflects a significant increase in the amount of affordable working capital loans provided to the farmers for agriculture and related activities. This indicates a deepening in agriculture and reduced dependency on non-institutional credit.
Agriculture is the backbone of the Indian economy, and past budget allocations have significantly contributed to the increase in the total value of loans under operative Kisan Credit Card (KCC) accounts, which has more than doubled from ₹4.26 lakh crore in March 2014 to ₹10.05 lakh crore in December 2024.
Building on this progress, the Union Budget 2025-26 introduces key measures to strengthen agricultural financing, including raising the loan limit under the Modified Interest Subvention Scheme from ₹3 lakh to ₹5 lakh and expanding the scheme to cover an additional 10 million farmers. Additionally, the launch of the Kisan Rin Portal in 2023 has digitized processes, replacing manual submissions of claims for Interest Subvention (IS) and Prompt Repayment Incentive (PRI) with quicker and more seamless transactions.
Ensuring hassle-free access to credit for farmers has been a top priority of the government, as observed in the budget. The reach of the KCC scheme has seen an increase, making it easier to access short-term and long-term agricultural needs, including cultivation costs, and other aligned undertakings.
Emerging Challenges
From 2014-15 to 2017-18, sectoral credit disbursement achievement ranged from 106 to 118 percent, thus indicating that all set targets were surpassed to show efficient allocation of credit. However, in 2019-20, the achievement dipped slightly to 103%. A more noticeable downturn occurred in 2023-24, where the achievement dropped to just 52%, significantly lower than previous years.
Source: EPRA International Journal of Agriculture and Rural Economic Research (ARER)
- Non-repayment of loans: Farmers who offer collateral are more likely to receive loans, due to their higher chances of repayment.
- Diversion of funds: According to the 2021 NABARD paper titled “Trends and Patterns in Agricultural Credit in India: A District Level Analysis of Uttar Pradesh,” the diversion of agricultural credit to non-agricultural purposes can be estimated by comparing agricultural credit to the value of actual input requirements for farming. The paper reveals that in states such as Tamil Nadu, Kerala, and Punjab, total short-term credit to agriculture allied sectors, as a proportion of value of inputs GVO-GVA, was far above 100%.This implies that a sizeable portion of agricultural credit was being diverted to non-agricultural purposes, thereby raised concern about possible diversion of farm-related funding.
- Insufficient credit: : The other main problems affecting the uptake of the scheme are limited access to credit, the menace of high-interest rates, and non-availability of loans on time, especially in regions like Rajasthan and Madhya Pradesh.
Recommendations to Strengthen the Scheme
- Strengthening KCC Implementation: Streamlining the KCC application and approval process for wider farmer accessibility, ensuring availability of separate clear information in local languages, and working around illiteracy among farmers.
- Credit Limit Rationalization: : Rationalization of credit limits through regular review, giving feedback for changing requirements of farmers, cropping patterns, and daily market conditions.
- Enhancing Institutional Support: Provide training programs for bank staff and extension workers on KCC guidelines to ensure effective implementation.
- Clear rejection reasons: The banks need to clearly communicate the reasons for rejecting an application, so that field officers can address issues and facilitate resubmission of corrected applications.
- Fixed Timeline for Decision: Establish a fixed timeline for decision-making on KCC applications, ensuring timely processing.
Way Forward
Agricultural credit under the Kisan Credit Card scheme is a prime driver of agricultural growth and rural development in India. With an increased loan limit and extended coverage, the initiative will foster agricultural growth, alleviate financial strain, and enhance productivity. Continuous evaluation of how it supports financial inclusion within agricultural growth in relation to achieving goals is fundamental to the development of the scheme.
In accordance with their appreciable gains, challenges such as repayment difficulties, diversion of funds, and inadequate credit access prevail. Expansion of the outreach and instilling simplicity in the process of applying, as well as enhancing awareness, would be pivotal to realizing its true potential. The KCC scheme has the potential to become a cornerstone of India’s agricultural framework, driving equitable rural development.
References
1) Factsheet details: (n.d.). https://pib.gov.in/FactsheetDetails.aspx?Id=148600®=3&lang=1
2) KISAN CREDIT CARD SCHEME. (n.d.). https://pib.gov.in/PressReleasePage.aspx?PRID=1808328
3) What is Kisan Credit Card scheme and how does it help farmers get agriculture loans? Find out. (n.d.). https://www.nabard.org/news-article.aspx?id=25&cid=552&NID=220
4) Operative Kisan Credit Card (KCC) amount crosses ₹10 Lakh Crore benefiting 7.72 Crore Farmers. (n.d.). https://pib.gov.in/PressReleasePage.aspx?PRID=2106230
5) Statista. (2025, February 19). Number of Kisan Credit Cards in India FY 2024, by leading state. https://www.statista.com/statistics/1245872/india-number-of-kisan-credit-cards-by-state/
6) AGRICULTURE CREDIT AND THE ROLE OF KISAN CREDIT CARD (KCC) IN INDIA. (n.d.). https://eprajournals.com/pdf/fm/jpanel/upload/2024/September/202409-03-018277
7) Trends and Patterns in Agriculture Credit in India: A District Level Analysis of Uttar Pradesh. (n.d.).https://www.nabard.org/auth/writereaddata/tender/2501235626trends-and-patterns-in-agriculture-credit-in-india.pdf
About the Contributor
Meyhar Kaur Walia is a Research Intern at IMPRI and pursuing her undergraduate degree in Political Science from Delhi University.
Acknowledgement
The author expresses sincere gratitude to all those who provided guidance, with special thanks to Dr Arjun Kumar and Ma’am Aasthaba Jadeja.
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