Banker For You: Kisan Credit Card: Agriculture Loan

1. Kisan Credit Card is provided with the following objectives: -

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 pumpsets, sprayers, dairy animals etc.

a) All farmers other than marginal farmers:

For first year: farmers raising single crop in a year(scale of finance*area cultivated +10% of limit towards post-harvest/house hold/consumption needs+ 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance, PAIS and asset insurance.
For subsequent years: First year limit plus 10% of the limit towards cost escalation/increase in scale of finance for every successive year and estimated term loan for the tenure of kisan credit card.
In case revision of scale of finance for any year by the DLTC exceeds the notional hike of 10%, a revised drawable limit may be fixed and the farmer is advised about the same.

Term Loan is provided towards investment in land development, minor irrigation, purchase of farm equipment’s and allied agricultural activities. The quantum of credit for term and working capital limit for agricultural and allied activities, etc., is worked out 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, and 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

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.

The card limit is bifurcated into separate sub limits for short term cash credit limit cum savings account and term loans, due to difference in interest rates, repayment schedule and norms.

b) For Marginal Farmers:

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.

The short term component of the KCC limit is in the nature of revolving cash credit facility.
There is no restriction in number of debits and credits.
The drawing limit for the current season/year could be allowed to be drawn using any of the following delivery channels e.g. Operations through branch, using Cheque facility, Withdrawal through ATM enabled KCC, Operations through Business Correspondents, Operation through PoS available in Sugar Mills/ Contract farming companies, input dealers, Mobile based transfer transactions at agricultural input dealers and mandies etc.
Issuance of ATM enabled Rupay card to eligible farmers.

5. Rate of interest

ROI will be linked to MCLR. However, if Government supported interest subvention is provided for any component of the limit, the rate of interest may be fixed accordingly.

6. Repayment Period:

The repayment period may be fixed as per anticipated harvesting and marketing period for the crops for which loan is granted.
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.

7. Margin:

For crop loans, no separate margin. For term loan component, margin will be:
Upto Rs 1.00 lac - NIL
Above Rs 1.00 lac - 15%

8. Security:

Up to Rs.1.00 lac- Hypothecation of crops
Above Rs.1.00 lacs, mortgage of land and/or third party guarantee in addition to hypothecated crops/assets.
In states where banks have the facility of online creation of charge on the land records, the same shall be ensured.

9. Documentation:

The scheme provides fixation of scale of Finance for the first year and subsequent increase for every successive year. Therefore documentation will be done by the Bank only for maximum limit so that there is no need of documentation during the validity of account.
Where the validity period of KCC is 5 years, there might be a legal requirement to renew the account by taking a fresh letter from the farmer before expiry of 3 years.

10. Other features:

Interest subvention/incentive for prompt repayment available as per norms.
Besides the mandatory Crop Insurance, KCC holders should have the option to take benefit of Asset Insurance, Personal Accident Insurance scheme (PAIS), and Health Insurance.
No processing fee should be charged up to a card limit of Rs, 3.00 lacs.
KCC short term sub-limit cum SB accounts to be allowed to enable credit balance in KCC/SB account to fetch interest at SB rate.