Kisan credit card

Kisan credit card- a financial innovation in agriculture credit market

1. Submitted to- Submitted by- Dr. Vikram Singh Ankush K umar S ingh Associate Professor M.Sc. (Ag) Agronomy Department of Agronomy I.D. No – 16MSAGRO016 Allahabad School of Agriculture Department of Agronomy SHIATS SHIATS Master’s Seminar on Kisan Credit Card – A Financial Innovation in Agriculture Credit Market COURSE CODE: AGRN-780

2. Introduction Kisan Credit Card is a credit card to provide affordable credit for farmers in India . It is a pioneering credit delivery innovation for providing adequate and timely credit to farmers under single window . Kisan Credit Card scheme was introduced by Government of Indian August 1998 with the aim to provide credit to farmers , on the basis of their land holdings, so that the farmers may use them to purchase agricultural inputs such as seeds, fertilizers, pesticides, etc. and also draw cash for their production needs.

3. Individuals who meet the following requirements can get a Kisan Credit Card Minimum age – 18 years Maximum age – 75 years at the end of loan tenure For borrowers above the age of 60, co-borrower less than 60 years old is mandatory . Such a co-borrower show be legal heir/immediate family member Joint holding (single or multiple locations) up to 5 persons is permitted Borrowers with good track record over the past 2 years would be the prime customers . Proof of operational land holding from the Patwari . Eligibility for Kisan Credit Card

4. Kisan Credit Cards are issued to the farmers on the basis of their land holdings and other criteria such as timely payment of past credits etc. Farmers covered under the Kisan Credit Card scheme are issued with a credit card and a pass book or a credit card cum pass book incorporating the name, address, particulars of land holding, borrowing limit, validity period, a passport size photograph of holder etc ., which may serve both as an identity card and facilitate recording of transactions on an on-going basis. How it Works

5. The Kisan Credit Card  scheme is implemented by public sector commercial banks, RRBs and cooperative banks. It was launched to provides short term loans in the form of production credit . However, later its scope was extended to term loans for agriculture and allied activities and reasonable component for consumption loan. Thus, currently this scheme provides: Production credit Working capital requirements for allied activities Ancillary credit requirements related to crop production Contingent needs and Accidental insurance of KCC borrowers. Crop loans disbursed under KCC scheme for notified crops are covered under National Crop Insurance scheme . The purpose of the scheme is to protect the interest of farmers against crop loss caused by natural calamities, pest attacks etc. Features of Kisan Credit Card

6. Eligible farmers to be provided with a Kisan Credit Card and a pass book or card-cum-pass book . Repayment for the amount borrowed can be made within a period of up to 12 months . Limit to be fixed on the basis of operational land holding, cropping pattern and scale of finance. Card valid for 3 years subject to annual review . As incentive for good performance, credit limits could be enhanced to take care of increase in costs, change in cropping pattern, etc. Conversion/rescheduling of loans also permissible in case of damage to crops due to natural calamities . Withdrawals through slips/cheques accompanied by card and passbook .

7. Interest Rate Under Kisan Credit Card The interest rates on Kisan Credit Cards varies from bank to bank and also on borrowing limits. In terms of Government of India instructions for 2013-14, all the crop loans up to Rs. 3 lakh are being disbursed at the interest rate of 7% p.a . Govt. of India also provides interest subvention of 3% p.a. to prompt repaying farmers, thus making available the crop loans to them at 4% p.a. and if the customer has a sound track record for three years, he/she is eligible for an increase in the credit limit .   Security - In terms of RBI instructions, no separate security is required for crop loans up to Rs. 1 Lakh . Beyond Rs. 1 lakh the security is decided by the individual bank in terms of RBI guidelines.

8. Insurance under Kisan Credit Card Kisan Credit Card holders are also covered by a personal accidental insurance . The cover is as follows: Death :  Rs . 50,000 Disability :  Rs . 25000 In order to be eligible to avail this insurance cover, the customer should not be above 70 year s of age at the time of obtaining the Kisan Credit Card .

9. Benefits of Kisan Credit Card Repayment only after harvest Hassle-free disbursement procedure No need to apply for a loan for every crop Helps buy seeds, fertilizers at farmer’s convenience and choice Single credit facility/ term loan for all agricultural requirements Credit is available for a period of up to 3 years, without any seasonal appraisals . Income from agricultural sources determines the maximum credit limit. There is no restriction on the cash withdrawals that can be made by the Kisan Credit Card holder, as long as it is within the credit limit set by the bank . Flexible repayment options. It can be rescheduled if there is a bad crop season, and extensions are offered for up to four years

10. Margin , security and documentation terms and conditions are similar to that applicable to agricultural advance. Minimal documentation and maximum flexibility offered for withdrawal of the required funds from the Bank. Funds can be withdrawn from any of the Bank’s branches . Conversion/re-scheduling of loans also permissible in case of damage to crops due to natural calamities .

11. Banks Providing Kisan Credit Card Facilities Commercial banks Co- Operative banks Regional rural banks Allahabad Bank Uttar Pradesh Co-operative Bank Allahabad UP Gramin Bank Andhra Bank Maharashtra State Co-operative Bank Baroda UP Gramin Bank Bank of Baroda Gujarat State Co-operative Bank Gramin Bank Of Aryavrat Bank of India Kerala State Co-operative Bank Madhyanchal Gramin Bank Bank of Maharashtra Prathama Bank Bharatiya Mahila Bank Sarva UP Gramin Bank Canara Bank Kashi Gomati Gramin Bank Central Bank of India Purvanchal Bank State Bank of India Shreyas Gramin Bank

12. ( No. of cards issued in lakhs ) (Source: Patil et al., 2016 ) Table 1. Agency-wise Kisan Credit Card issued in India Year Cooperative Bank RRBs Commercial banks Total 2000-01 56.14 6.48 23.9 51.34 2001-02 54.36 8.34 30.71 93.41 2002-03 45.79 9.64 27.00 82.43 2003-04 48.78 12.74 30.94 92.46 2004-05 35.56 17.29 43.96 96.81 2005-06 25.98 12.49 41.65 80.12 2006-07 22.98 14.06 48.08 85.12 2007-08 20.91 17.72 46.06 84.69 2008-09 13.44 14.14 58.34 85.92 2009-10 17.43 19.49 53.13 90.05 2010-11 37.88 13.42 42.18 93.48 2011-12 39.79 15.2 47.76 102.75 2012-13 26.91 20.48 82.43 129.82 Total 445.95 181.49 576.14 1203.58 KCC (%) 37.05 15.07 47.86 100

13. Figure 1. Diagrammatic representation of Agency-wise Kisan Credit Card issued in India (Source : Patil et al., 2016)

14. Benefits to Banks Reduction in work load for branch staff by avoidance of repeat appraisal and processing of loan papers under Kisan Credit Card Scheme. One time documentation at first availment and thereafter simple declaration from second year. Minimum paper work and simplification of documentation for drawl of funds from the bank. Improvement in recycling of funds and better recovery of loans. Reduction in transaction cost to the banks . Better Banker – Client relationships .

15. RESEARCH FINDINGS REGARDING OBJECTIVES

16. The study was conducted in Ashta block of Sehore district of Madhya Pradesh . Due to impact of short term crop loan, highest increase in yield was with wheat crop which amounted to 82.37 %. The highest percentage of magnitude of increased income 75.28% was for wheat crop followed by 68.78 % and 46.75 % respectively for gram and arhar respectively. Impact of KCC on Crop Yield and Income

17. (Source: Arvind et al ., 2013) Table 2. Crop wise distribution of yield per acre before and after borrowing loan under KCC scheme and change in yield S. no . Crops Yield (q/acre) Absolute change (q/acre) Relative Change (%) Before borrowing loan After borrowing loan 1. Soybean 05.88 07.81 1.93 32.82 2. Arhar 03.74 05.65 1.91 51.07 3. Wheat 06.41 11.69 5.28 82.37 4. Gram 03.43 05.98 2.55 74.34

18. ( Source: Sharma et al ., 2013) Table 3. Crop wise distribution of income per acre before and after borrowing loan and change in income S. no . Crops Income ( Rs ./acre) Absolute Change ( Rs .) Relative Change (%) Before borrowing loan After borrowing loan 1. Soybean 6174 8519 2345 37.98 2. Arhar 13090 19210 6120 46.75 3. Wheat 7051 12089 5308 75.28 4. Gram 8149 13754 5605 68.78

19. Impact of KCC on cropping pattern The study was conducted in Krishnagiri district of Tamil Nadu . The availability of adequate amount of credit and in proper time enables the farmers to take up cultivation of commercial crops. It is observed that the beneficiary farmers have recorded a higher cropping intensity of 233.33 per cent as against the non-beneficiary farmers who have recorded cropping intensity of only 208.03 per cent. It is also observed that the beneficiary farmers have allocated more area for the commercial crops like Sugarcane and banana which are a 10 months crop in the area.

20. Note : Figures in parentheses indicate percentage to net cropped area; *others include tomato and brinjal; **Sugarcane and banana are 10 months crops and the area under it is taken three times for computation of cropping intensity (Source - Prakash P, 2013) Table 4. Cropping pattern of the sample non-beneficiary and KCC beneficiary farmers (Kharif Season) Crops Non Beneficiary Farmers (Non KCC holder) Beneficiary Farmers (KCC holder) (In Acres) Rice 15.35 (75.6) 26.20 (52.6) Sugarcane** 1.58 (7.8) 12.35 (24.8) Banana** 0.74 (3.6) 7.00 (14.1) Groundnut 1.38 (6.8) 4.25 (8.5) Others* 1.26 (6.2) 0.0 (0.0) Sub Total 20.31 49.8

21. Note : Figures in parentheses indicate percentage to net cropped area; *others include tomato and brinjal. (Source - Prakash P, 2013) (Rabi Season) Crops Non Beneficiary Farmers (Non KCC holder) Beneficiary Farmers (KCC holder) (In Acres) Rice 13.25 (65.2) 23.45 (47.1) Okra 0.27 (1.3) 0.0 (0.0) Pulses 1.34 (6.6) 2.25 (4.5) Groundnut 1.38 (6.8) 0.0 (0.0) Others* 1.06 (5.2) 2.0 (4.0) Sub Total 17.3 27.7 Gross Cropped Area 42.25 116.2 Cropping Intensity 208.03 233.33

22. (Source - Prakash P , 2013)

23. The study was conducted in Krishnagiri district of Tamil Nadu . The primary data was collected from 60 beneficiary farmers and 60 non beneficiary farmers from district. Data was collected using pre-tested questionnaire on various aspects of farm business, factors influencing the adoption and constraints faced. The access to good quality loan enhances the use of inputs by the farmers. The farmers use good quality inputs and also use them at right time and in right dosage . It is observed that the beneficiary farmers are using higher dosage of inputs Impact of KCC on Input in Field

24. ( Source - Prakash P , 2013) Table 5. Input use by beneficiary and non-beneficiary farmers Items Paddy Sugarcane Groundnut (In Rs ./ha) Non KCC KCC Non KCC KCC Non KCC KCC Seed (Kg) 31.8 70.1 2.7 3.0 71.8 111.2 Inorganic Fertilizer (Kg) 142.4 250.0 440.4 601.6 94.7 186.9 Organic Fertilizer (Kg) 1.3 1.5 2.3 2.8 0.4 0.7 Irrigation (Hours) 70.0 72.5 157.5 182.5 7.5 16.0 Machine Power (Hours) 11.6 16.9 9.6 12.6 3.1 3.4 Human Labour (No.) 10.1 18.0 23.9 31.8 14.3 17.3 Plant Protection Chemicals ( litre) 0.1 4.6 2.1 3.9 0.7 1.9 Total 267.3 433.3 638.5 838.2 198.8 345.5

25. (Source - Prakash P, 2013)

26. Kisan Credit Card has played a significant role in farm operation and income of farmers. The timely availability of crop loan has helped to realize higher returns from farming. The farmers use good quality inputs and also use them at right time and in right dosage . Conclusion

27. Patil S., Ramesh G. B., (2016). Kisan Credit Card-A Financial Innovation in Agriculture Credit Market. Indian Journal of Economics and Development . 12(1): 206-208. Sharma A., Choudhary S., Swarnakar V.K., (2013). A Study on Impact of Kisan Credit Card Scheme among the Beneficiary Farmers in Sehore District of Madhya Pradesh. International Journal of Science and Research (IJSR). 2(1): 155-157. Singh A., Prakash P., Kumar D.K ., ( 2007). Performance of Rural Credit and Factors affecting Choice of Credit Sources. Indian Journal of Agricultural Economics , 62 (3 ): 115-119 References