Dr Som Dutt
The Kisan Credit Card (KCC) is one of the most innovative, widely accepted, highly appreciated and non-discriminatory banking products in our country. It is beneficial to farmers and small and marginal land holders. Though relative share of the institutions in the issue of agricultural crop loans remain the same, the progress under KCC is highly satisfactory.
The KCC scheme was started by the Government of India in consultation with the RBI (Reserve Bank of India) and NABARD (National Bank for Agricultural and Rural Development) 1998-99 to join the features of both these schemes and to overcome their shortcomings. Constant monitoring and thrust given by the NABARD has substantially enabled the progress.
The NABARD may be empowered to monitor the commercial banks also.
Though there is evidence of the KCC being more flexible and used as a cash credit facility, it appears that it will be sometime before the KCC is used fully as a credit card. One of the factors that inhibited velocity of transactions in the account is the repayment stipulations that: (i) sub-limits should be repaid before the next drawal, (ii) each drawal should be repaid within a year from the date of drawal, (iii) the account should be in credit at least once a year, and (iv) specific due dates irrespective of the crop marketing are causing procedural difficulties and need to be reconsidered.
Co-operative banks follow two due dates as they feel that drawal-wise due dates are complicated and impracticable. By and large one disbursement per season has been observed in the KCC.
The provision of timely and adequate credit has been one of the major challenges for banks in India in dispensation of agricultural and rural credit to the farmers. Constant innovation is required in order to achieve its aim. Agricultural credit cards are not a new concept in the field of agricultural banking in India.
The scheme had already been introduced in a number of public sector banks in a few states much earlier. These schemes were niche-marketed and were exclusively preserved for the privileged farmers, and the small and marginal farmers did not have much access to them. Similarly, cash credit facilities were being extended by several public sector banks and cooperative banks to farmers to improving their access to credit. Again, this scheme was used only selectively.
Eligible farmers are provided Kisan Credit Cards and a passbooks or card-cum-passbooks. Revolving cash credit facility involves any number of drawals and repayments within the limit. Limit is fixed on the basis of operational land holding, cropping pattern and scale of finance.
Entire production credit needs for full year plus ancillary activities related to crop production to be considered while fixing limit. Sub-limits to cover short-term, medium- term as well as term credit are fixed at the discretion of banks. The card is valid for 3 – 5 years subject to annual review.
The credit limit could be enhanced to take care of increase in costs and change in cropping pattern. Each drawl to be repaid within a maximum period of 12 months.
Conversion of loans also is permissible in case of damage to crops due to natural calamities. Security, margin and rate of interest are as per the RBI norms, according to a report in the Indian Farming .
As a part of the study as many as 177 farmers who had availed the KCC facility were interviewed to ascertain their view points. Of the 177 farmers covered in the study, 85 farmers, forming 48 per cent of the total, were new borrowers. It may be quite possible that some of them borrowed from other banks and may have shifted to new branches; but nonetheless, these were the customers of kisan card product.
The remaining 52 per cent were borrowers continuing with the same banks. Such a good number of new borrowers demanding kisan credit cards could due to many factors such as effective publicity by the banks, utility of kisan card cards and the continuous monitoring of the progress by the RBI and NABARD.
The Kisan Credit Card scheme envisages coverage of all the short- term credit needs of farmers including crop loan and other items of production credit/ working capital/ short-term requirements for non-farm activities. The idea behind this approach is to ensure that farmers get adequate credit to meet all of their short -term needs through the single window of kisan card card.
As many as 117, forming 67 per cent of the total farmers covered in the field visit, felt that the credit limits sanctioned to them under kisan card card were adequate. The rest 33 per cent, which mostly comprised borrowers from cooperative banks, felt that it is not adequate. This is because most of the cooperative banks had a ceiling on the amount of crop loans that could be sanctioned to an individual farmer.
As a result, the farmers with bigger land holding do not get sufficient credit to meet their entire needs and they are compelled to approach other agencies to bridge the gap. Some of the farmers fee that the scales of finance for different crops fixed by District Level Technical Committee (DLTC), in which cooperative banks had a major say, are on lower side.
In many districts, the DLTC had not revised the scales of finance for crops for quite some time now. It may be mentioned that the DLTC is the body having representatives from all major banks including cooperative banks and Government departments at the district level. District Central Cooperative Bank (DCCB) is the convenor of the task force meetings.
Cooperative banks are strictly following the scales of finance, even if they are quite old, whereas commercial banks and RRBs had been revising the scales if they fee that these are inadequate. Thus, the borrowers of commercial banks and RRBs are generally getting the advantage of higher credit as compared to borrowers of cooperative banks.
Thirdly, some of the farmers who had surplus amount but do not deposit it in the kisan card account are under the impression that they would not get any interest on credit balance . Their fears are mostly due to ignorance about the instructions in this regard as most of the banks had issued instruction to their branches to provide interest on the credit balance in the kisan card cash credit account.
The product of kisan card practically is only 2- year- old. It is expected that in another 1- 2 years this would become a very popular financial product among the rural clients and farmers would use it very effectively.
The objective of the kisan card scheme as given in the model scheme circulated by RBI and NABARD is to ensure adequate and timely support from banking system to farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner.
The KCC mode is cost effective and needs to be firmly established. Savings in expenditure ( cost) in the form of stamp duty and savings in expenses incurred in connection with the number of visits to the bank at pre-sanction stage are evident.
Banks have reported that they find it difficult to maintain data on crop-wise loan issue and outstanding. Similarly, the banks find it difficult to collect the details of non- borrowers and pass on the same to GIC.
The moneylender continues to play a crucial role in financing the farmers. It is necessary that the scope of KCC is expanded further to facilitate faster turn over of credit. It is expected that, in the long run due to better performance of KCC the role of the moneylender will be marginalized.
The focus of credit appraisal should be an evaluation of the income stream of the borrower, and a comprehensive assessment of credit needs taking into account track record, credibility, capability, as well as technical viability of the proposal.
Insistence on No Dues Certificate (NDC) as an invariable precondition for sanctioning a loan is unnecessary and time-consuming. Where banks are conversant with the track record of the borrowers, obtaining a NDC should be left to the discretion of the lending banker.
The accounting systems in banks need to focus on systems by which recovery is desegregated by loan products, as well as by time so that it is possible for managers to determine which products are more viable and whether current recoveries are better than past dues. The branch managers also need to have a statement of defaulting borrowers more promptly than is possible under the existing procedure.
The value of security taken should be commensurate with the size of the loan and the tendency to ask for additional collateral by way of guarantors where the land has already been mortgaged should be discouraged.Bank Training institutions need to design fresh interventions shifting their focus from the present activity specific/project based training programmes to those emphasing borrower appraisal including techniques for assessing the needs of the rural household in a holistic way vis-à-vis a vis-à-vis the income stream/ repayment capacity.
Upgradation of infrastructural facilities especially village market yards, rural roads and stable power supply will go a long way in expanding credit flow to the rural sector. The responsibility for maintaining public sector infrastructure should, where possible, be entrusted to local initiative.
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