Kisan Credit Card (KCC) Scheme in India

1
Welcome
2
Seminar I
on
KISAN CREDIT CARD FINANCIAL INNOVATION IN
INDIAN AGRICULTURAL CREDIT MARKET
Presented By
JAINUDDIN MULLA Dept. of Agril. Economics UAS,
Raichur
3
Sequence of Presentation
4
INTRODUCTION
5
Contd

• Milestones of agricultural credit in India
• First phase
• Social control of banks(1968)
• Nationalization of Banks- (1969 and 1980)
• Introduction of Lead Bank Scheme(1969)
• Formation of Regional Rural Banks(1975)
• Establishment of NABARD (1982)
• Introduction of Service Area Concept(1989)

6

• Second phase
• Financial sector reforms (1991)
• Launch of concept of micro finance
• Scheme of linkage of SHGs with banks (1992)
• Creation of rural infrastructure development fund
  (RIDF) 1995-96 with NABARD

7
Kisan credit card scheme

• The Reserve Bank of India (RBI) has set up one
  man high level committee of R.V. Gupta in
  December 1997. The committee submitted its report
  in April 1998.
• Based On the recommendations of R.V. Gupta
  committee, NABARD introduced Kisan credit card
  (KCC) scheme in August 1998
• RBI directed to all scheduled commercial banks
  and NABARD directed to all regional rural banks
  (RRBs) and Co-operative banks

8
OBJECTIVES

1. To meet the short term credit requirements for
   cultivation of crops
2. Post harvest expenses
3. Produce Marketing loan
4. Consumption requirements of farmer household
5. To meet the needs of Working capital
6. To meet Investment credit

9
SALIENT FEATURES OF KCC SCHEME
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1) Objective To provide adequate and timely credit for the comprehensive credit requirements of farmers under single window, with Flexible and simplified procedure.
2) Eligibility All Farmers Individuals / Joint borrowers who are owner cultivators, Tenant Farmers, Oral Lessees Share Croppers Maximum Age limit at the entry point for an individual is 70 years
3) Validity/ Renewal Card is valid for 5 years subject to annual review
4) Security As per guideline there is no collateral security required upto a loan limit of Rs.1.00lakh, Collateral security may be obtained for loan limit above Rs. 1.00 lakh in case of advances of non tie up for recovery and above Rs. 3.00 lakh for the advances with tie-up for recovery
11
Contd
5. Fixation of Credit limit All farmers other than marginal farmers short term limit to be arrived for the first year Scale of finance for the crop X of area cultivated 10 of limit towards consumption requirements 20 of limit towards working credit expenses 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 2) For Marginal Farmers Flexi KCC limit A flexible limit of Rs. 10,000.00 to Rs. 50,000.00 be provided based on the landholding and crops grown including post harvest warehouse storage related credit needs and other farm expenses, consumption needs, etc., plus small term loan. 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.
12
Contd
6) Margin money For short Term Loan -Upto Rs.1.00 Lakh -No Margin money For above Rs. 1.00 lakh - the applicable margin will be 15 to 25
7) No Due certificate There is no need for getting No Due Certificate from other banks for agricultural loan Up to 50,000
8) Rate of interest Up to Rs. 3 lakh- 7 per annum, where interest subvention is available otherwise normal rate of interest is applicable. Above Rs. 3 lakh- interest rate as applicable for direct agriculture loans
9)Repayment period the short term loan will be normally repayable within a 12 months. The term loan component will be normally repayable within a period of 5 years depending on the type of activity / investment
13
Contd
10) Nature of credit The credit extended under the scheme would be in the nature of revolving credit and provide for any number of drawals and repayments within the limit.
11) Documents to be obtained 1. Application form for Agriculture Loan 2. Revenue records 3. No Due certificate. 4. Loan cum Hypothecation agreement ( Crop, Livestock, Plant Equipment etc.) 5. Letter of Guarantee, wherever applicable. 6. Mortgage Deed wherever applicable
12) Other Features Conversion/ Reschedulement of loans permissible in case of damage to crops due to natural calamities. All borrowers should be covered under Personnel Accidental Insurance Scheme (PAIS)
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Personal Accident Insurance Scheme

• A Personal Accident Insurance Scheme (PAIS) is
  attached with KCC, which covers risk of KCC
  holders against accidental death or permanent
  disability upto a maximum amount of Rs.50,000 and
  Rs.25,000, respectively, resulting from
  accidents caused by external, violent and visible
  means.
• The insurance premium payable on personal
  accident insurance coverage to KCC holders will
  be Rs.15 for a one year policy and Rs.75 for five
  years.
• The premium payable to the insurance company is
  shared between the KCC issuing bank and the KCC
  holder in the ratio of 21.

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Benefits of KCC Scheme
FOR BANKS

• Reduction in work load for branch staff
• Minimum paper work and simplification of
  documentation for drawal of funds from the bank.
• Reduction in transaction cost to the banks
• Improvement in recycling of funds and better
  recovery of loans
• Better Banker - Client relationships

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FOR FARMERS

• Access to adequate and timely credit to farmers
• Flexibility to draw cash and buy inputs
• Assured availability of credit at any time
  enabling reduced interest burden for the farmers
• Minimum paper work and simplification of
  documentation for drawing of credit from the
  banks
• Sanction of the facility for 5 years subjected to
  annual review and satisfactory operations and
  provision for enhancement
• Flexibility of drawing credit from a branch other
  than the issuing branch at the discretion of the
  bank

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Differences between CLS and KCCS
Sl. No Particular Crop loan system (CLS) KCC system
1 Approach Multi Product and Multi Agency Approach (MPMAA) Multi credit product approach (MCPA)
2 Sub limits No sublimit 3 sub limits like production, asset maintenance, and consumption credit
3 Nature of credit No revolving cash credit facility i.e loan granted on crop specific basis against execution of fresh document revolving cash credit facility
4 Withdrawal of credit Either in Cash or Kind Only Cash
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Implementation Aspects of the KCC Scheme
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Implementation Aspects of the KCC Scheme

1. Introduction of the KCC Scheme
2. Eligibility Norms
3. Credit Limit
4. Fixation of Credit Limit
5. Restriction on Maximum Limit
6. Credit Limit for working capital and consumption
   purpose
7. Drawal Facilities
8. Repayments and NPA Norms under KCC
9. Coverage of KCC under PAIS and NAIS

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1.Introduction of the KCC Scheme State Cooperative Banks (SCB) were first to launch the KCC scheme, based on the model scheme circulated by NABARD in August 1998. Co-operative banks were followed by RRBs and commercial banks. The RRBs had launched the scheme with effect from the year 1998-99 and had formulated their guidelines on the basis of the model scheme circulated by NABARD in August 1998. Commercial Banks had launched the Scheme based on the model scheme circulated by Reserve Bank of India in August 1998.
2.Eligibility Norms In case of PACS, all the members with operational holding who were not defaulters were eligible for issuance of KCC. In case of RRB and commercial banks, KCC issued to only those farmers who were having good track record of 2-3 years.
3.Credit Limit Initially, while circulating the model scheme on KCC among the banks, RBI and NABARD had recommended KCC for the farmers where requirement of crop loan was Rs.5,000 and more.
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4.Fixation of Credit Limit Credit limit under KCC may be fixed on the basis of operational land-holding, cropping pattern and scales of finance (SoF) as recommended by DLTC/SLTC Wherever the DLTC/SLTC have not recommended scale of finance or lower scales than the required amount for crops , banks were allowed to fix appropriate scales of finance depending upon the crop
5.Restriction on Maximum Limit The maximum amount a member can borrow has been fixed by the Co-operative banks in the range of Rs.35,000-Rs. 50,000 The RRB branches restricted the KCC limit in the range of Rs.50,000-Rs.1,00,000/- The commercial bank branches give liberal limit provided the farmer provides them with adequate security in the form of mortgage of land and they are satisfied with the credibility of the farmer
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6.Credit Limit for Non-crop Component According to KCC scheme guidelines, in the beginning all the banks had issued instructions for inclusion of consumption loan and working capital requirement for ancillary activities The Co-operative banks did not provide credit for consumption and working capital requirements for ancillary activities related to crop production The RRB and commercial banks were making a provision for consumption loan to the extent of 10 per cent of the total limit sanctioned on the KCC
7.Drawal Facilities One of the objectives of KCC was to allow flexibility to the farmer for drawal of cash at various branches of the issuing bank particularly those located in semi urban or urban areas All the banks have restricted the operations in KCC to the issuing branches only In Cooperative banks, drawals were allowed at the branch of DCCB only. The KCC was being issued by the DCCBs through PACS but the loan was issued at the branch level.
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8.Repayments Norms under KCC The limit sanctioned under the KCC is in the nature of revolving cash credit and each drawal is repayable within 12 months In case of PACS , the due date for repayment was twelve months from the date of drawal. In PACS, The loan becomes overdue the interest subvention benefit was not extended to the farmers normally from the date of disbursement In case of RRB and the commercial banks, the due dates were 31 March for kharif and 30 September for Rabi. The interest rebate and the interest subvention were applied up to the due date
9.Coverage of KCC under PAIS and NAIS The crop loan disbursed under KCC issued by the banks are covered under National Agriculture Insurance Scheme (NAIS). PAIS- it covers Death 50,000, Disability 25000, Maximum Age to enter 70 years.
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• Progress of Kisan Credit Card Scheme

a) progress of KCC in India b) progress of KCC in
Karnataka
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Flow of institutional credit to agricultural and
allied sectors
PERIOD I (1988-89 TO 1998-99) PERIOD I (1988-89 TO 1998-99) PERIOD I (1988-89 TO 1998-99) PERIOD I (1988-89 TO 1998-99) PERIOD I (1988-89 TO 1998-99) PERIOD I (1999-00 TO 2009-10) PERIOD I (1999-00 TO 2009-10) PERIOD I (1999-00 TO 2009-10) PERIOD I (1999-00 TO 2009-10) PERIOD I (1999-00 TO 2009-10)
year CO-OP BANK SCBs RRBs Total year CO-OP BANK SCBs RRBs Total
1988-89 46.68 34.14 4.79 85.61 1999-00 162.41 126.1 28.08 316.59
1989-90 49.48 40.05 5.75 95.27 2000-01 181.68 154.42 36.92 373.02
1990-91 51.78 42.35 5.9 100.02 2001-02 215.4 188.82 48.12 452.34
1991-92 51.1 46.31 6.79 104.19 2002-03 245.18 232.11 64.95 542.24
1992-93 59 49.88 7.99 116.87 2003-04 308.08 319.82 76.64 704.54
1993-94 66.4 54.25 8.87 129.52 2004-05 324.81 427.98 109.8 862.59
1994-95 70.91 61.54 11.15 143.61 2005-06 341.4 599.71 138.77 1079.88
1995-96 93.12 71.73 13.08 177.93 2006-07 377.64 760.06 187.07 1324.77
1996-97 96.18 87.66 16.25 200.09 2007-08 436.96 961.52 227.48 1625.96
1997-98 100.6 95.22 19.14 214.69 2008-09 456.86 1262.85 266.52 1986.23
1998-99 104.62 108.21 22.38 235.21 2009-10 549.7 1676.23 336.63 2562.56
CAGR 10.2 12.2 17.5 11.6 CAGR 9.0 19.9 19.5 15.6
www.indiastat.com
26
Agency-wise progress of Kisan Credit Card (KCC)
in India
No. of cards issued in lakhs and Amount
sanctioned in crores
Year Cooperative Banks Cooperative Banks Regional Rural Banks Regional Rural Banks Commercial Banks Commercial Banks Total Total
Year Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned
1998-1999 1.55 826 0.06 11 6.22 1473 7.84 2310
1999 2000 35.95 3,606 1.73 405 13.66 3537 51.34 7,548
2000 2001 56.14 9,412 6.48 1,400 23.90 5615 86.52 16,427
2001 2002 54.36 15,952 8.34 2,382 30.71 7,524 93.41 25,858
2002 -2003 45.79 15,841 9.64 2,955 27.00 7,481 82.43 26,277
2003 2004 48.78 9,855 12.74 2,599 30.94 9,331 92.47 21,785
2004 2005 35.56 15,597 17.29 3,833 43.96 14,756 96.80 34,186
2005 2006 25.98 20,339 12.49 8,483 41.65 18,779 80.12 47,601
2006 2007 22.98 13,141 14.06 7,373 48.08 26,215 85.11 46,729
2007 2008 20.91 19,991 17.72 8,743 46.06 59,530 84.70 88,264
2008 -2009 13.44 8,428 14.14 5,648 58.34 39,009 85.92 53,085
2009 2010 17.43 7,606 19.49 10,132 53.13 39,940 90.06 57,678
2010-2011 37.88 1,40,595 13.42 53,964 42.18 2,32,919 93.48 4,27,478
2011-2012 39.79 1,51,313 15.20 65,431 47.76 2,83,362 102.75 5,00,106
CAGR 10.00 27.60 31.00 53.00 2.80 41.00 14.4 36.2
KCC () 40.30 31.91 14.37 12.79 45.33 55.30 100 100
Total 456.54 4,32,502 162.8 1,73,359 513.59 7,49,471 1132.95 1355332
Source Report on Trends and Progress of Banking
in India 2009-2011
27
Source compiled from many sources
28
Percentage share of KCC in Total Agricultural
Institutional Credit
Source Anjani Kumar et al., 2011
29
Total Flow of Credit to Agricultural sector
through KCC
Source Anjani Kumar et al., 2011
30
State wise Farm house holds having Kisan Credit
Cards, 2003
(percent)
STATES Marginal Small Medium Large All
Andhra Pradesh 10.44 16.09 22.76 27.27 13.25
Anrunachal Pradesh 0.63 1.52 2.38 0.00 0.98
Assam 0.85 1.74 1.37 7.14 1.07
Bihar 0.92 4.58 3.47 15.52 1.61
Chhattisgarh 1.39 6.42 3.64 9.09 3.68
Gujarat 1.75 3.99 8.33 17.72 4.74
Haryana 1.09 2.70 8.77 11.82 3.21
Himachal Pradesh 0.82 5.81 1.56 0.00 1.47
Jammu Kashmir 0.97 3.03 3.77 8.70 1.33
JHARKHAND 1.08 2.35 0.00 7.69 1.24
Karnataka 0.77 2.23 2.75 7.08 1.92
Kerala 1.04 2.70 8.00 25.0 1.28
Madhya Pradesh 1.44 2.05 5.64 16.96 4.01
Maharashtra 1.06 1.39 2.60 5.36 1.74
Source Unit Level Data of NSSO, Debt and
Investment Survey 59th Round
31
Contd
States Marginal Small Medium Large All
Meghalaya 0.41 0.98 0.00 0.00 0.46
Mizoram 0.91 6.58 1.92 000 2.02
Manipur 0.75 1.00 2.13 000 0.85
Nagaland 0.43 0.00 0.00 000 0.34
Orissa 3.69 6.53 9.01 16.67 4.50
Punjab 1.36 3.35 4.24 9.63 2.24
Rajasthan 1.47 3.63 6.38 11.01 3.94
Sikkim 0.41 0.00 0.00 000 0.32
Tamilnadu 0.78 2.96 5.26 7.14 1.41
Tripura 0.95 0.00 0.00 000 0.99
Uttar Pradesh 4.48 13.86 26.0 32.52 7.40
Uttarakhand 1.72 3.70 17.65 100 2.33
West Bengal 0.89 2.36 1.32 6.67 0.98
All 2.08 5.12 8.01 13.16 3.41
Source Unit Level Data of NSSO, Debt and
Investment Survey 59th round
32
Stat wise distribution of KCCs, 2009-10
STATES KCC Issued NSA ( Percent) Percent of Operational Holding covered by KCC
Andhra Pradesh 15.67 7.2 127.24
Assam 0.52 1.95 17.9
Bihar 3.54 3.94 28.62
Chhattisgarh 1.69 1.28 48.55
Gujarat 3.07 6.99 67.91
Haryana 2.45 2.52 157.2
Himachal Pradesh 0.45 0.39 46
Jammu Kashmir 0.09 0.53 5.7
Karnataka 5.68 7.52 75.19
Kerala 3.55 1.49 49.93
Madhya Pradesh 5.74 10.46 73.02
Maharashtra 8.76 12.41 67.57
Orissa 5.66 4.07 130.28
Punjab 2.43 3.01 228.33
Rajasthan 5.23 1190 84.2
Tamilnadu 6.34 3.64 75.58
Uttar Pradesh 16.97 11.81 73.35
Uttarakhand 0.66 0.54 69.31
West Bengal 3.42 3.76 47.19
All 100 100 78
Source Agricultural statistics at Glance, 2010
33
Coverage of different categories of farmers under
KCC scheme
Particular Small Medium Large All
Households having ( per cent ) KCC 8.5 21.64 35.8 10.89
Share of KCC ( per cent ) 13.93 31.15 54.92 100.0
Average credit granted ( Rs / household ) 95000 1741189 228651 192009
Farm house hold satisfied with KCC scheme ( per cent) 88.2 89.2 91.9 90.5
Source Anjani Kumar et al., 2011
34
State-wise progress of Kisan Credit Card scheme
in India (as on march 31,2011)
No. of cards issued in 000 and Amount
sanctioned in crores
States / UTs Co-operative Bank Co-operative Bank Regional Rural Bank Regional Rural Bank Commercial Bank Commercial Bank Total Total Percentage of KCC Covered
States / UTs Cards issued Amount sanctioned Cards issued Amount sanctioned Cards issued Amount sanctioned Cards issued Amount sanctioned Percentage of KCC Covered
A.P 4143 7129 2354 5156 10982 40436 17479 52721 49
Bihar 833 1008 1372 5495 2167 10046 4372 16549 16
GUJ 1267 18846 259 2744 1714 24462 3240 46052 8
HAR 1273 7924 408 3853 959 11194 2640 22971 8
H.P 203 675 70 413 286 1780 559 2868 2
KAT 1991 7737 1411 7132 2914 19554 6316 34423 20
Kerala 1583 4654 494 1987 1691 7248 3768 13889 11
M.P 3701 16976 650 3759 2052 17213 6403 37948 18
MH 5513 33210 338 1242 3572 17106 9423 51558 23
Orissa 3910 10847 782 1732 1434 4569 6126 17148 18
Punjab 936 6683 163 2478 1512 21634 2611 30795 7
RAJ 3410 10835 581 6721 2073 24917 6064 42473 17
TN 1826 6215 321 739 4838 20368 6985 27322 17
U.P 6511 8002 4285 16499 7665 46823 18461 71324 60
W.B 1632 6118 531 2489 1731 5685 3894 14292 11
JKD 279 544 438 602 607 2070 1324 3216 5
CGH 1224 2899 354 984 359 2060 1937 5943 6
UKD 335 763 55 266 351 3456 741 4485 2
O/ UTs 129 248 330 1141 853 2741 1312 4130 4
Total 40699 151313 15196 65432 47760 283362 103655 500107 100
Source Report on Trends and Progress of Banking
in India 2009-2011
35
Progress of Kisan Credit Card scheme in
Karnataka (as on march 31,2011)
No. of cards issued in 000 and Amount
sanctioned in crores
Year Cooperative Banks Cooperative Banks Regional Rural Banks Regional Rural Banks Commercial Banks Commercial Banks Total Total
Year Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned Cards Issued Amount Sanctioned
2009 -2010 1677 6873 1097 5376 2266 13011 5040 25260
2010-2011 1867 7197 1255 6135 2543 15476 5665 28808
2011-2012 1991 7737 1411 7132 2914 19554 6316 34423
Total 5535 21807 3763 18643 7723 48041 17021 88492
Percentage covered () 33 25 22 21 45 54 100 100
CGAR 6.64 7.50 12.43 16.25 14.59 26.25 14.49 19.49
Source Report on Trends and Progress of Banking
in India 2009-2011
36
Competition comparison of KCC between agency
Agency Market share Offering Pricing Service
Co-operative Banks / Regional Rural Banks More than 50 Tendency to underfund Focus on small farmers Most loans are sub 3 lakhs being offered at 4 -7 rate of interest (due to subvention available) Provide basic services Advantage is nearness to customer Very cumbersome process for amounts above 50,000/-
Public sector commercial Banks 43.7 Focus on large farmers Tendency to underfund Most loans are sub 3 lakh being offered at 4 -7 rate of interest (due to subvention available) Better service for customer with larger landholding 33.8 feels that amount sanctioned was not adequate
Private sector Banks minimum Focusing on top end customers with requirement of high loan amount 10-13 Good service levels Not near to customer
www.icicibank.com
37
Credit assessment for short and long term
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Credit assessment in KCC Scheme

• Small farmer raising multiple crops in a year
• Land holding (irrigated) 3 acres
• Cropping Pattern i) Kharif Paddy 1 acre
• ii) Rabi
  Wheat 1 acre
• Long term crop Sugarcane 1 acre
• Scale of finance for crops in 2010-11
• paddy- 9,500/-
• wheat- 7,000/-
• Sugarcane- 25,000/-

Source www.rbi.org.in
39
Credit assessment for short term
Sl. No Particulars Requirement for ST Production credit in Rs (Acres X Scale of Finance) Consumption component in Rs.(10 of Col-3) Expenditure for maintenance of Farm Assets in Rs.(20 of Col-3) Drawing Limit (in Rs.)
1 2 3 4 5 6
1. KHARIF SEASON( LOANING TIME IST APRIL TO 30 TH SEPTEMBER) KHARIF SEASON( LOANING TIME IST APRIL TO 30 TH SEPTEMBER) KHARIF SEASON( LOANING TIME IST APRIL TO 30 TH SEPTEMBER) KHARIF SEASON( LOANING TIME IST APRIL TO 30 TH SEPTEMBER) KHARIF SEASON( LOANING TIME IST APRIL TO 30 TH SEPTEMBER)
Paddy 9,500/- 950/- 1900/- 12,350/-

2. RABI SEASON( LOANING TIME 1ST OCTOBERTO 31ST MARCH) RABI SEASON( LOANING TIME 1ST OCTOBERTO 31ST MARCH) RABI SEASON( LOANING TIME 1ST OCTOBERTO 31ST MARCH) RABI SEASON( LOANING TIME 1ST OCTOBERTO 31ST MARCH) RABI SEASON( LOANING TIME 1ST OCTOBERTO 31ST MARCH)
Wheat 7,000/- 700/- 1400/- 9,100/-

Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 21,450/-

Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 23,595/-

Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,954/-

Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 26,190/-

Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 28,809/-
Source www.rbi.org.in
40
Credit assessment for long term
Sl. No Particulars Requirement for ST Production credit in Rs (Acres X Scale of Finance) Consumption component in Rs.(10 of Col-3) Expenditure for maintenance of Farm Assets in Rs.(20 of Col-3) Drawing Limit (in Rs.)
1 2 3 4 5 6
I CROP LOAN CROP LOAN CROP LOAN CROP LOAN
a) Kharif season( loaning time ist April to 30 th September) Kharif season( loaning time ist April to 30 th September) Kharif season( loaning time ist April to 30 th September) Kharif season( loaning time ist April to 30 th September)
Paddy 9,500/- 950/- 1900/- 12,350/-
b) Rabi season( loaning time 1st October to 31st march) Rabi season( loaning time 1st October to 31st march) Rabi season( loaning time 1st October to 31st march) Rabi season( loaning time 1st October to 31st march)
Potato 7000/- 7,00/- 1400/- 9,100-
Total Crop Loan Total Crop Loan Total Crop Loan Total Crop Loan 21,450/-
II TERM LOAN TERM LOAN TERM LOAN TERM LOAN
Term loan for Sugar cane Term loan for Sugar cane Term loan for Sugar cane Term loan for Sugar cane 25,000
CREDIT LIMIT UNDER KCC CREDIT LIMIT UNDER KCC CREDIT LIMIT UNDER KCC CREDIT LIMIT UNDER KCC
Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 25,000/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 25,000/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 25,000/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 25,000/- Total Requirement of Production Credit at the end of 1st year 12,350/- 9,100/- 25,000/- 46,450/-

Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 25,000/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 25,000/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 25,000/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 25,000/- Total Requirement of Production Credit at the end of 2nd year 21,450/- 2145/- 25,000/- 48,595/-

Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,000/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,000/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,000/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,000/- Total Requirement of Production Credit at the end of 3rd year 23,595/- 2359/- 25,000/- 50,954/-

Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 25000/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 25000/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 25000/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 25000/- Total Requirement of Production Credit at the end of 4th year 25,954/- 2595/- 25000/- 51,190/-

Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 25000/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 25000/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 25000/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 25000/- Total Requirement of Production Credit at the end of 5th year 26,190/- 2,619/- 25000/- 53,809/-
Maximum Permissible Limit (crop loan term loan) Maximum Permissible Limit (crop loan term loan) Maximum Permissible Limit (crop loan term loan) Maximum Permissible Limit (crop loan term loan) Maximum Permissible Limit (crop loan term loan) 53,809/-
41
Case Studies on KCC
42
Case study-1

• Cash-in Benefits of the Kisan credit card scheme
  Onus is upon the farmer
• By Singh and Sekhon, 2005

43
Objectives

1. To study the existing procedure of advancing
   credit under KCCS
2. To examine the adequacy of credit extended under
   KCCS
3. To identify the major constraints

44

• 1. To work out the credit requirement , the model
  used was
• R C 0.5D.( 1)
• Where
• Rcredit requirement, Ccrop expenditure ,
  Ddairy expenditure,
• C?(?Cj)m..........(2)
• Cjexpenditure on j-th input of m-th crop
• j 1,2..8,
• where 1-value of seed, 2- value of
  fertilizer, 3-value of pesticide, 4- value of
  fuel, 5-Irrigation, 6- labour charges, 7- Custom
  hiring payment 8- land rent
• D0.5(?Dk)....(3)
• Dkexpenditure on k-th item of dairy
• K1 - 4
• Where1Value of concentrates 2Value of straw
  3Green fodder 4Veterinary charges

45
Credit gap on per farm and per hectare of KCC
beneficiary
Category of sample KCC beneficiary Category of sample KCC beneficiary Category of sample KCC beneficiary Category of sample KCC beneficiary
Kharif season Small 1 Medium 2 Large 3 Overall 4
I Limit sanctioned Per farm Per hectare 77500.00 24839.74 101842.10 20047.66 182272.70 17765.37 105200.00 20387.60
II Credit requirement Per farm Per hectare 79235.91 25396.13 127886.00 25174.41 239512.30 23344.28 127392.50 24688.47
III Credit gap Per farm Per hectare 1735.91 556.39 2604.86 5126.75 57239.60 5578.91 22192.49 4300.87
IV Credit gap in percentage 2.23 20.36 23.90 17.42
Rabi season
V Credit requirement Per farm Per hectare 79467.87 25470.47 129568.40 25505.59 236257.70 23027.07 127848.00 24776.74
VI Credit gap Per farm Per hectare 1967.87 630.73 27726.30 5457.93 53985.00 5261.70 22647.98 4389.14
VII Credit gap in percentage 2.48 21.40 22.85 17.71
Source Singh and Sekhon, 2005
46
Rating of features of KCC Scheme
( in per cent )
Sl.No Feature description Level of satisfaction Level of satisfaction Level of satisfaction
Sl.No Feature description I II III
1 Timely availability of credit 91 9 0
2 Adequacy of limit 79 16 5
3 Procedure of making KCC limit 41 41 18
4 Reduction in cost of accessing credit 73 16 11
5 Simplicity in annual renewing of KCC-limit 96 4 0
6 Operational efficiency of KCC-account 83 17 0
7 Reduction in interest burden 100 0 0
Note I extremely satisfactory, II average,
III below average
Source Singh and Sekhon, 2005
47
Opinion survey of non KCC members for their non
adoption scheme
Reason Small Medium Overall Avg
Fear of non-repayment 64 13 32
Satisfied with owned resources 29 75 57
Bad experience in past with the institutional source of credit 7 8 8
Lack of awareness 0 4 3
Total 100 100 100
Source Singh and Sekhon, 2005
48
Case study-2

• Progress and Performance of Kisan Credit Card
  Scheme with a Case Study of Bihar

By Diwas Raj Bista, Pramod Kumar and V.C.
Mathur, 2012
49
Objective

• Assessing the progress and impact of KCC scheme
  on farm economy
• Analysing the constraints being faced by KCC
  beneficiary and non-beneficiary farmers and
• iii) Identifying the factors that influence the
  adoption of KCC scheme.

50
Models used

• 1) Logit model is used to know Factors affecting
  adoption of KCC scheme
• 
  i1 25
• where P probability that y, have value
  one for the household having KCC,
• factors that influence
  households decision to hold KCC
• Coefficient of explanatory
  variable
• 2) Garretts ranking technique is used to
  identify constraints faced by the farmers in KCC
• Percent Position 100( Rij-0.5)/Nj
• where Rij rank given
  to i th attribute by the j th individual
• Nj number of
  attribute ranked by j th individual.

51
Agency-wise flow of Kisan Credit Cards in Bihar
Amount in lakh Rupees and amount per KCC account
in Rupees
Agencies 2001-02 2001-02 2001-02 2010-11 2010-11 2010-11 CAGR (2001-02 to 2010-11) CAGR (2001-02 to 2010-11) CAGR (2001-02 to 2010-11)
Agencies No. Of KCC issued Amt. sancti-oned Amt. / KCC issued No. Of KCC issued Amt. sanctio-ned Amt. / KCC Account No. Of KCC issued Amt. sanction-ed Amt. / KCC Account
Co-op Banks 129944 10060 7742 0 0 0 - - -
Regional Rural Banks 7604 994 13072 262000 142700 54466 48.2 73.7 17.2
Comer. Banks 76518 16597 21691 305000 186500 61148 16.6 30.8 12.2
All agencies 214065 27651 12917 567000 329200 58060 11.4 31.7 18.2
Source Diwas Raj Bista et al., 2012
52
Transaction cost for borrowing loan through Kisan
Credit Cards
Sl. No. Particulars KCC beneficiary KCC non-beneficiary
1 Legal documentation 375 1125
2 Commission 400 1200
3 Travel cost 280 420
4 Total 1055 2745
5 Per year cost 352 915
Source Diwas Raj Bista et al., 2012
53
Cost of cultivation of paddy and potato for KCC
beneficiary and non-beneficiary farmers
(Rupees /ha)
Sl.No. Cost items Paddy Paddy Potato Potato
Sl.No. Cost items KCC Beneficiary KCC Non-Beneficiary KCC Beneficiary KCC non-Beneficiary
1 Working capital 13359 11739 26518 21891
2 Interest on working capital 178 157 354 292
3 Land revenue other taxes 33 33 33 33
4 Depreciation on farm assets 270 486 270 486
Cost A1 13840 12414 27174 22702
5 Interest on fixed capital 216 389 216 389
6 Rental value of land 2038 2038 2038 2038
Cost B1 1456 12803 27390 23091
Cost B2 16093 14841 29428 25129
7 Family labour 1603 1330 2280 1900
Cost C1 16658 14133 29670 24991
Cost C2 17696 16171 31708 27029
Cost C3 19466 17788 34820 29731
Source Diwas Raj Bista et al., 2012
54
Returns over costs for KCC beneficiary and
non-beneficiary
Particulars Paddy Paddy Potato Potato
KCC Beneficiary KCC Non-Beneficiary KCC Beneficiary KCC Non-Beneficiary
Gross returns 24013 21241 57057 45644
Farm business income 10173 8827 29883 18738
Return over cost B1 9957 8438 29667 18349
Family labour income 8354 6835 27629 16311
Net return over cost C1 7355 7108 27387 16449
Net return over cost C2 6317 5071 25349 14411
Net return over cost C3 4547 3454 22237 15912
source Diwas Raj Bista et al., 2012
55
Constraints in adoption of KCC scheme
Sl. No. CONSTRAINTS Garrett Mean Score Rank
Beneficiary farmers Beneficiary farmers Beneficiary farmers
1 Lengthy paper work 76 1
2 Insufficient credit limit 70 2
3 High interest rate 66 3
4 Loan not available on time 57 4
5 Difficulty in opening bank account 52 5
6 Inflexibility in use of branch 48 6
7 Inflexibility in withdrawal 43 7
8 Lack of consumption loan 32 8
9 Locational difficulty 31 9
10 Lack of motivation from officials 24 10
Non-beneficiary farmers Non-beneficiary farmers Non-beneficiary farmers
1 Difficulty in opening bank account 75 1
2 Easy access to non-institutional loan 66 2
3 Fear of being a defaulter 63 3
4 Bad experience of peer groups 52 4
5 Insufficient credit limit 45 5
6 Lack of awareness about the benefits of scheme 39 6
7 Lack of motivation from officials 32 7
Source Diwas Raj Bista et al., 2012
56
Estimates of factors influencing adoption of KCC
scheme
Parameter Estimate Standard Error Marginal Effect
Intercept 0.567 1.23 -
Education 0.209 0.27 0.040
Age -0.035 0.02 -0.007
Farming experience 0.087 0.03 0.016
Land size 0.163 0.08 0.031
Membership to cooperatives -1.448 0.72 -0.276
Source Diwas Raj Bista et al., 2012
57
Case study-3

• Economic Evaluation of Kisan Credit Card Scheme

By A.M. Sajane et al., 2011
58
Methodology

• The study conducted in the Belgaum and Sangli
  district of Karnataka and Maharastra states
• Both secondary and primary data on KCC were used
  in the study.
• The primary data were collected from a) 60 KCC
  beneficiary farmers and
• 
  b) 60 non-beneficiary
  Farmers
• Models used
• 1 ) compound growth rate (CGR) analysis
• 2) Tabular analysis
• Objective
• 1) To evaluate the efficiency of KCC credit

59
Cost of Credit in KCC and non KCC beneficiaries
Particular (cost in rupees) KCC KCC KCC KCC Non -KCC Non -KCC Non -KCC Non -KCC
Particular (cost in rupees) Small Medium Large Overall Small Medium Large Overall
Average amount barrowed per form 18800.00 50679.00 59300.00 42659.67 18465.00 31943.00 49276.00 33228.00
Travel cost 45..00 47.00 53.00 48.33 84.00 92.00 93.00 71.67
Documentation cost 40.00 57.50 72.52 56.67 60.00 77.50 95.00 77.50
Total NIC cost 85.00 104.5 125.5 105.00 144.00 169.5 188.00 167.17
NIC as per cent amount barrowed 0.45 0.20 0.21 0.29 0.77 0.53 0.38 0.56
Interest cost 846.00 2280.55 2668.5 1931.68 1938.83 3354.02 5173.98 3488.94
Total cost 931.00 2385.05 2794.00 2036.68 2082.83 3523.52 5361.98 3656.11
Total cost as percent of amount barrowed 4.90 4.70 4.71 4.77 11.27 11.03 10.88 11.06
Source A.M. Sajane et al., 2011
60
Policy Implications

• There is a need to adopt measures to reduce
  paperwork and time in sanctioning a loan under
  KCC scheme.
• To reduce regional disparity in the performance
  of KCC scheme, the government should launch
  awareness generation programmes about the
  benefits of this scheme.
• The limit of the loan amount per account should
  be raised to attract more farmers.
• The process of opening a bank account should be
  simplified to bring more farmers under the
  scheme.
• There is a need to strengthen the cooperative
  banking system in the rural areas by infusing
  more resources.
• The government should ensure the timely
  availability of good quality inputs like seed,
  manure, plant protection materials by improving
  marketing infrastructure so that farmers could
  properly utilize the loan taken under KCC scheme.

61
CONCLUSION
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