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General Awareness play a vital role in all  Examination. we can expect  Questions from different Topics.In Banking and other competitive exams like RRB, CDS, LIC AO, RBI, SSC, UPSC, FCI, UIIC, OICL, SBI Clerks and PO the questions on Kisan Credit Card (KCC)  are being asked. Here we have given Banking awareness study notes on : Kisan Credit Card (KCC) for SSC CGL Examinations 2019-20 & other examination. Candidates those who are all preparing for the Examination can use this study material.



Introduction

The Kisan Credit Card has emerged as an innovative credit delivery mechanism to meet the production credit requirements of the farmers in a timely and hassle-free manner. The scheme is under implementation in the entire country by the vast institutional credit framework involving Commercial Banks, RRBs and Cooperatives and has received wide acceptability amongst bankers and farmers. However, during the last 13 years of implementation, many impediments were encountered by policy makers, implementing banks and the farmers in the implementation of the scheme. Recommendations of various Committees appointed by GOI and studies conducted by NABARD also corroborate this fact. It was, therefore, felt necessary to revisit the existing KCC Scheme to make it truly simple and hassle free for both the farmers and bankers. Accordingly, the GOI, Ministry of Finance constituted a Working Group to review the KCC Scheme. Based on the recommendations of the Working Group which were accepted by the Gol, the following guidelines are issued:

Objectives/Purpose

Kisan Credit Card Scheme aims at providing adequate and timely credit support from the banking system under a single window to the farmers for their cultivation & other needs as indicated below:

  • To meet the short term credit requirements for cultivation of crops
  • Post harvest expenses
  • Produce Marketing loan
  • Consumption requirements of farmer household
  • Working capital for maintenance of farm assets and activities allied to agriculture, like dairy animals, inland fishery etc.
  • Investment credit requirement for agriculture and allied activities like pump sets, sprayers, dairy animals etc.

Eligibility

  • All Farmers – Individuals / Joint borrowers who are owner cultivators
  • Tenant Farmers, Oral Lessees & Share Croppers
  • SHGs or Joint Liability Groups of Farmers including tenant farmers, share croppers etc.

 

Fixation of credit limit/Loan amount

The credit limit under the Kisan Credit Card may be fixed as under:

  • All farmers other than marginal farmers:
  • The short term limit to be arrived for the first year: For farmers raising single crop in a year: Scale of finance for the crop (as decided by District Level Technical Committee) x Extent of area cultivated + 10% of limit towards post-harvest / household / consumption requirements + 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance, PAIS & asset insurance.

 

  • Limit for second & subsequent year :First year limit for crop cultivation purpose arrived at as above plus 10% of the limit towards cost escalation / increase in scale of finance for every successive year ( 2nd , 3rd, 4th and 5th year) and estimated Term loan component for the tenure of Kisan Credit Card, i.e., five years. 

 

  • For farmers raising more than one crop in a year, the limit is to be fixed as above depending upon the crops cultivated as per proposed cropping pattern for the first year and an additional 10% of the limit towards cost escalation / increase in scale of finance for every successive year (2nd, 3rd, 4th and 5th year). It is assumed that the farmer adopts the same cropping pattern for the remaining four years also. In case the cropping pattern adopted by the farmer is changed in the subsequent year, the limit may be reworked. 

 

  • Term loans for investments towards land development, minor irrigation, purchase of farm equipments and allied agricultural activities. The banks may fix the quantum of credit for term and working capital limit for agricultural and allied activities, etc., based on the unit cost of the asset/s proposed to be acquired by the farmer, the allied activities already being undertaken on the farm, the bank’s judgment on repayment capacity vis-a-vis total loan burden devolving on the farmer, including existing loan obligations.

 

  • The long term loan limit is based on the proposed investments during the five year period and the bank’s perception on the repaying capacity of the farmer

 

  • Maximum Permissible Limit: The short term loan limit arrived for the 5th year plus the estimated long term loan requirement will be the Maximum Permissible Limit (MPL) and treated as the Kisan Credit Card Limit.

 

  • Fixation of Sub-limits for other than Marginal Farmers

 

  • Short term loans and term loans are governed by different interest rates. Besides, at present, short term crop loans are covered under Interest Subvention Scheme/ Prompt Repayment Incentive scheme. Further, repayment schedule and norms are different for short term and term loans. Hence, in order to have operational and accounting convenience, the card limit is to be bifurcated into separate sub limits for short term cash credit limit cum savings account and term loans.

 

  • Drawing limit for short term cash credit should be fixed based on the cropping pattern and the amounts for crop production, repairs and maintenance of farm assets and consumption may be allowed to be drawn as per the convenience of the farmer. In case the revision of scale of finance for any year by the district level committee exceeds the notional hike of 10% contemplated while fixing the five year limit, a revised drawable limit may be fixed and the farmer be advised about the same. In case such revisions require the card limit itself to be enhanced (4th or 5th year), the same may be done and the farmer be so advised. For term loans, installments may be allowed to be withdrawn based on the nature of investment and repayment schedule drawn as per the economic life of the proposed investments. It is to be ensured that at any point of time the total liability should be within the drawing limit of the concerned year.

 

  • Wherever the card limit/liability so arrived warrants additional security, the banks may take suitable collateral as per their policy.

 

A flexible limit of Rs.10,000 to Rs.50,000 be provided (as Flexi KCC) based on the land holding and crops grown including post harvest warehouse storage related credit needs and other farm expenses, consumption needs, etc., plus small term loan investments like purchase of farm equipments, establishing mini dairy/backyard poultry as per assessment of Branch Manager without relating it to the value of land. The composite KCC limit is to be fixed for a period of five years on this basis. Wherever higher limit is required due to change in cropping pattern and/or scale of finance, the limit may be arrived at as per the estimation.

Rate of Interest (ROI)

Rate of Interest will be linked to Base Rate and is left to the discretion of the banks.

Repayment Period

  • Each withdrawal under the short term sub-limit as estimated under (a) to (e) of Para 3 above ,be allowed to be liquidated in 12 months without the need to bring the debit balance in the account to zero at any point of time. No withdrawal in the account should remain outstanding for more than 12 months.
  • The term loan component will be normally repayable within a period of 5 years depending on the type of activity / investment as per the existing guidelines applicable for investment credit.
  • Financing banks at their discretion may provide longer repayment period for term loan depending on the type of investment.

Security

  • Security will be applicable as per RBI guidelines prescribed from time to time.
  • Security requirement may be as under:
  • Hypothecation of crops up to card limit of Rs. 1.00 lakh as per the extant RBI guidelines.
  • With tie-up for recovery: Banks may consider sanctioning loans on hypothecation of crops up to card limit of Rs.3.00 lakh without insisting on collateral security.
  • Collateral security may be obtained at the discretion of Bank for loan limits above Rs.1.00 lakh in case of non tie-up and above Rs.3.00 lakh in case of tie-up advances.
  • In States where banks have the facility of on-line creation of charge on the land records, the same shall be ensured.
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