Context:
In the Budget, the loan limit under Kisan Credit Card (KCC) has been enhanced from ₹3 lakh to ₹5 lakh. It will benefit 8 million of 77.7 million KCC accounts only. But it is offered only for farmers with good repayment history and commercial farming, only.
Expansions to Extend Scope
- It will benefit 8 million farmers who account for about 10.3 percent of all the holders of KCC. These have a history of borrowing in ₹3 lakh and more. Having a very sound repayment track will help bring least risk for banks. Will Exclude
- Farmers who has a weak track record in paying back.
- Not mainly operating in commodity farming.
Financial Burden
- The subsidy on interest expense is projected to increase to ₹26,000 crore from ₹22,600 crore during FY26.
- The policy will not put an additional burden on banks since the scheme only includes eligible accounts.
- KCC Utilization will increase.
- 77.5 million active KCC accounts as of March 2024, with ₹9.81 trillion outstanding loans.
- The operative KCCs grew at a rate of 5.4% during FY24 and outstanding loans saw a rise of 10.9%.
- Even though growth was seen slowing down from 18.3% to 13.2%, it is the southern region that recorded the highest growth in outstanding KCC loans.
KCC & Interest Subvention Schemes
- Modified Interest Subvention Scheme (MISS)
- 7% concessional loan rate up to ₹3 lakh.
- 3% Prompt Repayment Incentive (PRI), which brings down the rate to 4% for timely payers.
- Includes post harvest loans covered by Negotiable Warehouse Receipts (NWRs).
- KCC has raised the limit of a ₹1.6 lakh collateral free loan for fisheries & animal husbandry since 2018 19.
- Kisan Rin Portal is launched for digital claim processing under MISS.
Rising Non Performing Assets in Agriculture
- Agriculture NPAs increased from 25.4% (March 2023) to 28.4% (March 2024).
- Even though the usage of KCC has been increasing, loan defaults are a concern.
