Budget FY26: Govt increases KCC loan limit to Rs 5 lakh from Rs 3 lakh

The move will boost rural economic growth, says experts, call for swift disbursal of these loans, where technology such as AI can be great enablers

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The loan limit for farmers holding Kisan Credit Cards (KCC) has been hiked to Rs 5 lakh from Rs 3 lakh earlier, a move which will provide farmers greater access to institutional credit, and in turn may help boost rural economic growth.

 

While making the announcement, Union Finance Minister Nirmala Sitharaman said in her Budget speech, “Kisan Credit Cards (KCC) facilitate short term loans for 7.7 crore (77 million) farmers, fishermen, and dairy farmers. The loan limit under the Modified Interest Subvention Scheme will be enhanced from Rs 3 lakh to Rs 5 lakh for loans taken through the KCC.”

 

The KCC scheme, launched in 1998, provides short-term crop loans to farmers engaged in agriculture and allied activities at a benchmark rate of 9 per cent. As of June 30, 2023, the scheme had over 740 million active KCC accounts, with a total outstanding credit of ₹8.9 trillion.

 

“The move will ensure farmers are able to procure enough credit to increase productivity, which will give a boost to rural economic growth. We believe the KCC loan limit should be periodically revised in the coming years as well to account for rising inflation. We also need to focus on swift disbursal of these loans, where technology such as AI can be great enablers. Automating KCC loans increase efficiency and satiate the need of farmers on time, reducing the risk of crop failures due to lack of finance during sowing,” said Vishal Sharma, Co-founder & CEO of AdvaRisk, an ICICI and NABARD-backed fintech startup.

 

Earlier, while discussing the KCC strategy, Shaji KV, Chairman of the National Bank for Agriculture and Rural Development (NABARD), said the program aims to saturate not just land-owning farmers but also those with minimal land holdings and individuals involved in allied activities like animal husbandry and fisheries.

 

“Agriculture encompasses more than just crop production, and these sectors also require access to subsidised credit to improve their per capita income. To support this, we are running a campaign in collaboration with the Department of Financial Services, involving all banks and rural financial institutions, to ensure that the animal husbandry and fisheries sectors receive adequate credit. We are also encouraging state governments to register fish farmers, as improving registration is crucial. Once farmers are registered and linked to their activities, we can effectively prompt banks to provide loans,” said the NABARD Chairman.

 

To provide KCC to all eligible farmers, the government launched two phases of the KCC Saturation Campaign in February 2019.

 

According to data provided by NABARD, as of October 2024, 167.53 lakh KCCs with a total credit limit of ₹1.73 trillion were issued by Cooperative Banks and Regional Rural Banks (RRBs) as part of the saturation drive. This includes 11.24 lakh KCCs with a credit limit of ₹10,453.71 crore for dairy farmers and 0.65 lakh KCCs with a credit limit of ₹341.70 crore for fish farmers.

 

Under the KCC scheme, loans up to ₹3 lakh are available at a concessional interest rate of 7 per cent per annum. Additionally, farmers who repay their loans promptly can avail interest subvention of 3 per cent, effectively reducing the interest rate to 4 per cent per annum. For loans exceeding ₹3 lakh, the interest rates are determined by the respective bank’s board-approved policies. 

 

11.24 lakh KCCs with a credit limit of Rs 10,453.71 crore for dairy farmers.  0.65 lakh KCCs with a credit limit of Rs 341.70 crore for fish farmers.  Under the KCC scheme, loans up to Rs 3 lakh are available at a concessional interest rate of 7 per cent per annum. Additionally, farmers who repay their loans on time can avail an interest subvention of 3 per cent, effectively reducing the interest rate to 4 per cent per annum. For loans exceeding Rs 3 lakh, the interest rates are determined by the respective bank’s board-approved policies.