Budget likely to raise KCC credit limit from Rs 3 lakh to Rs 5 lakh

The central government is likely to increase the borrowing limit under the Kisan Credit Card (KCC) scheme from Rs 3 lakh to Rs 5 lakh in the upcoming Union Budget for FY26, to be presented on February 1, according to a source familiar with the matter.

 

“Since the last revision of the KCC limit was quite some time ago, and the government has been receiving continuous demands, this move aims to support farmers and boost rural demand. Hence, the government may increase the KCC limit to Rs 5 lakh from the current limit,” said the official.

 

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. The government offers an interest subvention of 2 per cent and a prompt repayment incentive of 3 per cent to farmers, thus making credit available effectively at a subsidised rate of 4 per cent per annum. As of June 30, 2023, the scheme had over 74 million active KCC accounts, with a total outstanding credit of Rs 8.9 trillion.

 

“The limit has not been revised for several years, despite the substantial increase in farming costs. This revision will spur production growth in the agriculture sector and contribute to rising farming incomes,” said Vishal Sharma, co-founder and chief executive officer (CEO) of ICICI and National Bank for Agriculture and Rural Development (Nabard)-backed fintech AdvaRisk.

 

“Any increase in farmers’ income not only improves their lifestyle but also reduces risks for the banking system, as farmers will be better able to repay loans on time,” Sharma said.

 

While discussing the KCC strategy earlier, Nabard Chairman Shaji K V had said the programme aims to include not just land-owning farmers but also those with minimal landholdings 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.

 

According to data provided by Nabard, 16.75 million KCCs with a total credit of Rs 1.73 trillion were issued by cooperative and regional rural banks as of October 2024 as part of the saturation drive. This includes 1.12 million KCCs with credit of Rs 10,453.71 crore for dairy farmers and 65,000 KCCs with credit of Rs 341.70 crore for fish farmers.

 

“The government is also exploring ways to modify the Pradhan Mantri Fasal Bima Yojana (PMFBY) to make it more viable for farmers. We are considering reducing the role of state governments in the compensation process in the event of crop loss,” the official added.

 

Launched in 2016, PMFBY offers comprehensive coverage against crop losses due to natural calamities and unforeseen weather events. The scheme has paid over Rs 1.7 trillion in claims, ensuring financial protection for farmers.   

Decoding the scheme

 

> Launched in 1998, Kisan Credit Card scheme had over 74 million accounts, with outstanding credit of Rs 8.9 trillion as of June 30, 2023

> It provides short-term loans to farmers at a rate of 9%

> Govt offers interest subvention of 2% and prompt repayment incentive of 3%

> This makes credit available at a subsidised rate of 4%

> According to data provided by Nabard, cooperative and regional rural banks had  issued 16.75 million cards with credit of Rs 1.73 trillion as of October 2024

With inputs from Sanjeeb Mukherjee