A STUDY ON

KISAN CREDIT CARD

WITH REFERENCE TO
CANARA BANK
A Project Report Submitted in Partial Fulfillment of the
Requirement for the Award of the Degree of
Bachelor of commerce
Submitted by
G.SREE BHARGAV
Regd No: 2018-1908073
Under the guidance of
Smt. P. ROJA
ASSISTANT PROFESSOR

Department of Commerce
GVP COLLEGE FOR DEGREE AND PG COURSES (AUTONOMOUS)
Affiliated to Andhra University
Dwaraka Nagar Campus.
Visakhapatnam-530016
Batch – no 2018-2021
A STUDY ON
KISAN CREDIT CARD
WITH REFERENCE TO
CANARA BANK
A Project Report Submitted in Partial Fulfillment of the
Requirement for the Award of the Degree of
Bachelor of commerce
 Submitted by
G.SREE BHARGAV
Regd No: 2018-1908073
Under the guidance of
Smt. P. ROJA
ASSISTANT PROFESSOR

Department of Commerce
GVP COLLEGE FOR DEGREE AND PG COURSES (AUTONOMOUS)
Affiliated to Andhra University
Dwaraka Nagar Campus.
Visakhapatnam-530016
Batch – 2018-2021
CERTIFICATE

This is to certify that the Project Report titled “A study on Kisan Credit Card With Reference to
CANARA BANK” submitted by G.Sree Bhargav , bearing Regd No . 2018 – 1908073 final year
5th semester in Department of commerce , Gayatri Vidya Parishad College for Degree and PG
Courses (Autonomous ), Visakhapatnam for the award of Bachelor of Commerce Degree from
Andhra University under my guidance and supervision

Visakhapatnam

Date:
 Smt . P. ROJA

DECLARATION

I here by declare that the project work entitled “A STUDY ON KISAN CREDIT CARD WITH
REFERENCE TO CANARA BANK” submitted by me to Gayatri Vidya Parishad College for
Degree & PG courses is genuine & bonafide work done by me is not submitted to any other
universities. The project work done is for the partial fulfillment for the award of BACHLOR OF
COMMERCE degree affiliated to Andhra University, Visakhapatnam.

Place: Visakhapatnam
Date:

G.Sree Bhargav
2018-1908073
 ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of any task that would
be incomplete without the mention of who made it possible and whose constant guidance and
encouragement crowned all the efforts of success.
I would like to express my sincere gratitude to professor P. RAJ GANAPATI, joint secretary,
Gayatri Vidya Parishad, for his continuous motivation towards completion of the project.
I am grateful to Prof. B. MADHUKAR PATNAIK, Princpal, Gayatri Vidya Parishad, and
college for Degree and PG Courses (Autonomous), Visakhapatnam for having allowed me to
take up this project and utilize all the resources available for the college.
I would like to express my sincere gratitude to Dr.M.F.RAHIMAN, Director, Gayatri Vidya
Parishad, college for Degree and PG Courses (Autonomous), Visakhapatnam for giving me an
opportunity to work in this project.
I would like to thank Dr.Smt.V.VIJAYA LAKSHMI, Head of the department of commerce
Gayatri Vidya Parishad, and college for degree and PG.courses, Visakhapatnam and giving me an
opportunity to work in this project and providing kind suggestions as and when required.
I would like to thank Smt. P.ROJA Assistant Professor for her valuable guidance and support for
the completion of my project work
My special thanks to all the members of the staff in the Department of Commerce, who have
helped me in the completion of my project.
I would like to thank my parents who encouraged me throughout my educational endeavor and
my project work
Place:
G V P College for Degree and PG Courses
Dwarakanagar campus
Visakhapatnam
 G.Sree Bhargav
Regd.No.2018 – 1908073
. Final year B.com

Table of Contents
• CHAPTER 1 INTRODUCTION
• NEED FOR STUDY
• OBJECTIVES
• RESEARCH METHODOLOGY

• CHAPTER 2 PROFILES

• BANKING INDUSTRY PROFILE

• Canara Bank PROFILE

• CHAPTER 3 THEORITICAL FRAMEWORK

• CHAPTER 4 DATA ANALYSIS ANDINTREPRETATION

• CHAPTER 5 FINDINGS AND SUGGESTIONS

• FINDINGS
• SUGGESTIONS
• BIBLOGRAPHY
 KISHAN CREDIT CARD
CHAPTER 1
INTRODUCTION
Agricultre plays a crucial role in the development of the Indian economy. It accounts for
2lpercent of GDP and about twothirds of the population is dependent on agriculture. The
importance of agricultural oredit as a critical input to agriculture is reinforced by the unique role
of the Indian agriculture in the macro economic framework and its role in poverty alleviation.
The 1950s and 1960s had been chatactefized by a big industrial push with inadequate attention
being given to agriculture. It was the 1965-67 drought thu brought matters to a head and focused
concenfrated attention to agriculture. Despite all the efforts, the flow of credit to the agricultural
sector failed to exhibit any appreciable improvement to the fact that commercial banks were not
tuned to the needs and requirements of small and marginal farmers. In such a situation NABARD
was setup in l982.Since its inception, the NABARD has played a central role in providing
financial assistance, facilitating institutional development and encouraging promotional efforts in
the area of rural credit. Kisan credit card is a notable development in recent years in the area of
rural credit

The Kisan Credit Card (KCC) scheme is a credit scheme introduced in August 1998 by Indian
banks. This model scheme was prepared by the National Bank for Agriculture and Rural
Development (NABARD) on the recommendations of R.V.GUPTA committee[1] to provide term
loans for agricultural needs

CIRCULAR PARTICUARS
DATES
14 Aug 1998 Introduction of KCC Scheme and circulation of Model
KCC scheme to banks
14 Jun 2001 Personal Accident Insurance Scheme (PAIS) for KCC
holders introduced
9 aug 2004 • Scheme to cover term loan for agriculture &
 allied activities under KCC introduced
• (ii) Validity of Kisan Credit Card increased
from 3 years to 5 years
1 jun 2016 In response to Union Finance Minister’s budget
announcement (2006-07), interest on short term credit to
farmer was fixed at 7% up to KCC upper limit of Rs. 3.0
lakh on principal amount.
31 Oct 2006 KCC scheme for the borrowers of Long Term Cooperative
Credit Structure i.e., State Coop Agri & Rural Dev Banks
introduced
29 MAR 2012 Kisan Credit Card – a comprehensively revised KCC
scheme incorporating many new components (composite
loan, 10% & 20% provisions for consumption & asset
maintenance, year-wise drawing power for five years,
etc.) was launched
09 Nov 2012 Scheme for issue of KCC in the form of interoperable
RuPay Cards 15 Nov 2012 In a meeting of Union Finance
Minister with Banker, it was decided to convert all old
KCCs into ATM-cum-Debit/RuPay Cards
01 Aug 2014 Support for ICT solutions through POS/ micro-ATMs and
RuPay Kisan Cards under KCC scheme
08 Jul 2015
Coverage of KCC holders under Atal Pension Yojna
(APY)

OBJECTIVES

•To know about the importance, advantages and disadvantages of using the
 kissan credit card by NABARD to help Farmers .

•To make a comparative study considering with its past.

•To know the extent of growth compared to its past.

•To study whether it is useful and helpful in the development of the economy.

•Knowing the strength and improvingthem.

Need of the study

• To full fill my graduation

• To archive substantial knowledge

• To understand some topics and gain some knowledge in banking

• To score good marks

• To gain some awareness on kisan credit card

• To help farmers by giving collected and say to them about kissan credit card

Scope of the study

• The scope of this study about kisan credit card is

• It will be given by rural banks, cooperative banks, public sector banks etc. on their home
loans so its scope is limited

• As its scope is so small it deals some matters like customers relationship with the banks
on the basis of credit facilities

• To aware that RBI is helping farmer

Research methodology

Generally data is required for any type of interpretation. Data refers to information

that is used as an input for a particular purpose based on which certain decisions are

taken. Based on the data we have to make a detailed study and make an analysis.

Research methodology is further classified as

• Primary data/method

• Secondary data/method

• PRIMARY METHOD:

Primary data can be explained, therefore, as information collected from sources

such as personal interviews, questionnaires or surveys with a specific intention and
on a specific subject, and observation and discussion by the researcher him or
herself, which information is then assessed by that person. Primary data may be
collected either through observation or through direct communication with
respondents in one form or another through personal interviews. There are several
ways of collecting primary data.

•SECONDARY METHOD:

Secondary data is information that is already available somewhere, whether it be in

journals, on the internet, in a company's records or, on a larger scale, in corporate or
governmental archives

Research Methodology For the purpose of the study, the period-wise and agency-
wise progress have been studied. The data has been taken for the financial years
from 2015-2016 to 2020-2021. The data has been accumulated from various reports
of NABARD and publications of Reserve Bank of India. The agency-wise analysis
has been done for commercial banks, regional rural banks and co-operative banks
providing Kisan credit card scheme during the period
Limitations

•The following are the limitations of the study are

•The first limitations that I faced is that I had no past experiences in making
such projects. This was the first time we were asked to do such type of
projects.

•Time constraint is also one of our limiting factors.

•Availability of collecting the data was difficult.

•Time, cost and location factors caused difficulties.

• Employees avoided or hesitated to give relevant data

CHAPTER: 2
INDUSTRY PROFILE
INTRODUCTION CANARA BANK:
A Brief Profile of the Bank

Widely known for customer certainly, Canara Bank was founded by Sheri Ammembal Subba
Rao Pai, a great visionary and philanthropist, in JULY 1906, at Mangalore, then a small port
town in Karnataka. The Bank has gone through the varios phases of its growth trajectory over
hundred years of its existence. Growth of Canara bank was phenomenal, epescially after
nationalization in the year 1969, attaining the status of a national level player in terms of
geographical reach and clientele segments. Eighties was characterized by business diversification
for the Bank. InJune 2006, the Bank completed a century of opertaion in the Indian banking
industry. The eventiful journey of the bank has been characterized by several memorable
milestones. Today, Canara Bank occupies a premier postion in the comity of Indian banks.
Canara Bank has several firsts to its credit. These include:

• Launching of Inter-City ATM Network

• Obtaining ISO Certificate for a Branch

• Articulation of 'Good Banking'- Bank's Citizaen Charter

• Commissioning of Exclusive Mahila Banking Branch

• Launching of Exclusive Subsidiary for IT Consultancy

• Issuing credit card for farmers

• Providing Agricultural Consultancy Services

Over tthe years, the Bank has been scaling up its market position to emerge as a major 'Financial
Conglomerate' with as many as nine subsisiaries/sponsored institutions/jiont ventuers in India
and abroad. As at March 2016, the Bank has further expanded its domestic presence, with 5841
branches spread across all geographical segments. Keeping customer convenience at the
forefront. the Bank provides a wide array of alternative delivery channels that include 9251
ATMs, covering 4081 centers. Several IT initiatives were undertaken during the year. The Bank
set up 170 hi-tech E-lounges in select branches with facilities like ATM, Cash Deposit Kiosk
with voice guided system, Cheque Deposit Kisok, Self Printing Passbook Kisosk, Internet
Banking Terminal, Online Trading Terminal and Coporate Website Access. 'Canara e-Infobook' -
an electronic passbook and banking related information facility was introduced on mobile
platforms - Andriod, Windows & iOS. The Bank also launched Canara BANk RuPay Debit Card,
Canara club card - Debit, Canara Secured Credit Card, Canara Elite Debit Card, Canara Bank
Platinum RuPay Cards, Platinum Rupay Card and EMV Chip Cards under debit and credit cards.
Online Savings Bank and PPF account opening were inttroduced during the year. The Bank
made several value additions under internet banking and mobile banking services. The Bank has
introduced enhanced version of CanMobile, Canara e-InfoBook- an electronic passbook and
banking related information facility on mobile platforms - Andriod, Windows & iOS and Canara
m-Wallet to provide more convenience and facilities to customers. Canara Galaxy, a combo
product launched, comprising SB, Demat, OLT, Internet & Mobike Banking, Insurance, card
services and other odd-ons. Canara bank has extended facility to customers for request of
personlized cheque book for Galaxy Accounts without visiting branch through ATM / Mobile
Banking / Internet banking. Under education loan interest subsidy, web portals released for
Central Scheme Interest Subsidy (CSIS), Minstry of HRD, Gol, Dr. Ambedkar Central Sector
Scheme of Interest Subsidy (ACSIS), Ministry of Social Justice & Empowerment, Gol and
Padho Pardessh, Ministry of Minority Affiars, Gol.

The Bank has launched Instant loan application sanction portal for Housing loan and Car Loan.
The bank issued MUDRA Debit Card for overdraft accounts under MUDRA Card scheme. P2U
(Person to UIDAI) funds transfer through Mobile banking in WAp channel was enabled by the
Bank. Subscripition of Social Security Schemes of Govt. of India through ATM, SMS and
Internet Banking was enabled by the Bank has implemented "Jeevan Pranam" a digital life
certificate for pensioners. not just in commercial banking, the Bank has also carced a distinctive
mark, in various corporate social responsibilites, namely serving national priorties, promoting
rural development, enhancing rural self-employment through several training institutes and
spearheading financial inclusion objective. Promoting an inclusive growth strategy, whhich has
been formed as the basic plank of national policy agenda today, is in fact deeply rooted in the
Bank's founding priniciples. " A good bank is not only the financial heart of the community,
but also one with an obligation of helping in every possible manner to improve the
economic conditions of the common people". These insightful words of our founder continue
to resonate even today in serving the society with a purpose. the growth story of Canara Bank in
its first century was due, among others, to the continued patronage of its leaders at the helm of
affairs. We strongly believe that the next century is going to be equally rewarding and eventful
not only in service of the nation but also in helping the bank emerge as a "Preffered Bank" by
pursuing global benchmarks in profitability, opertional efficiency, asset quality, risk management
and expanding the global reach.

HISTORY OF CANARA BANK

Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by also Shri Ammembal Subba Rao
Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd'. in
1910 amd became Canara Bank in 1969 after nationalization.

" A good bank is not only the financial heart of the community, but also one with an
obligation of helping in every possible manner to improve the economic conditions of the
common people"- A. Subba Rao Pai.

MISSION

Founding Principles

1. To remove Supersition and ignorance.

2. To spread education among all to sub-serve the first principle.
3. To incalculate the habit of thrift and savings.
4. To transform the financial institution not only as the financial heart of the community
bbut the social heart as well.

5. To assist the needy.

6. To work with sense of service and dedication.
Sound founding principles, enlightened leadership, unique work culture and remarkable
adaptability to changing banking environmenthave enabled Canara Bank to be a frontline
banking institution of global standards.

VISION STATEMENT OF CANARA BANK

The CANARA Bank is comitted to maintain the highest level of ethical standards, professional
integrity and regulatory compliance. CANARA Bank's business philosophy is based on four core
valve such as :-

1. Opertional excellence.
2. Customer Focus
3. Product leadership.
4. People.
The objective of the CANARA Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-step window for all his/her
requiements. The CANARA Bank plus and the investment advisory services programs have been
designed keeping in mind needs of customers who seeks distinct financial solutions, information
and advice on various investment avenues.

CHAPTER 3
THEORITICAL FRAMEWORK
Kisan Credit Card Scheme
1. Government of India introduced the Kisan Credit Card scheme (KCC) scheme in 1998 as an
innovative credit delivery mechanism to enable the farmers to meet their
production credit requirements in a timely and hassle-free manner. The KCC
guidelines have gone through several changes since then. The guidelines
revised in 2012 has incorporated many new features over & above the financing of
crop production requirement, viz., consumption expenditure, maintenance of farm
assets, term loan for agriculture & allied activities, coverage of KCC holders under
PAIS and recently the coverage of KCC holders under Atal Pension Yojna etc.
2. Govt of India suggested NABARD to conduct a study on the implementation of
the revised KCC with a view to understand
(i) Is the revised Kisan Credit Card Scheme serving its intended purpose?
(ii) Reasons for gap between number of agricultural households and number of
operative KCCs
(iii) Government had advised banks to convert all existing KCCs into ATM/RuPay
cards. Whether action plan in this regard has been chalked out at branch level?
Also, whether all new KCCs are issued in the form of RuPay/ATM debit cards?
(iv) Efficacy of debit cards issued under KCC Scheme with regards to the inter-
operability and issues related thereto? Whether farmers are using these cards for
payment to different vendors? Back-end issues with NPCI/other platforms?
(v) Overall impact of revised KCC scheme?
3. Keeping in view the requirement of the study, two districts from each of the
Six states falling in different geographical regions of the country namely, Assam
(NE Region), Bihar (East Region), U. P. (Central Region), Punjab (North Region),
Maharashtra (Western Region) and Karnataka (southern Region) were selected for
the study. A total of 71 branches of 32 banks covering all the three agencies i.e.,
Commercial Bank, RRB and DCCB were selected for the study. Finally, total of
980 farmers covering 714 KCC holders and 255 other non-KCC farmers were
selected for the study.
4. The cumulative number of KCC cards issued since inception (1988-89) till
March 2015 had reached to 14.64 crore. However, this number of KCC accounts
(14.64 crore) cannot be considered as coverage of number of farmers under KCC
scheme, as many farmers have got reissued/ renewed their KCC several times.

5. The number of operative/ live KCC as on 31 March 2015 stood at 7.41 crore.
This achievement is against the total operational land holdings estimated at 13.83
crore by Agricultural Census (2010-11) or number of agricultural households
estimated at 9.02 by National Sample Survey Organization (70th Round).
6. The analysis of state-wise total number of operative/ live KCCs issued by all the
agencies indicates that 6 big states viz., Uttar Pradesh (15.15%), Andhra
Pradesh(11.02%), Maharashtra (10.07%), Madhya Pradesh (9.66%) and Rajasthan
(8.33%) together account for about 55% of total number of operative/ live KCCs.

FIXATION OF KISAN CREDIT CARD LIMIT

As observed from the application cum appraisal form of the sample farmers, in 434
cases (61% of the sample), KCC limits were fixed taking into account both Kharif
as well as Rabi crops. In rest of the cases, either only kharif crop (35% of the
sample) or only Rabi crop (4% of sample) were considered for fixing of KCC
limit. It was observed that almost similar type of cropping pattern was shown for
majority of the farmers in a particular bank branch which speaks about the non-
seriousness in filling up the appraisal form ‘Scale of Finance’ (SOF) is another
important parameter for the fixation of KCC limit. The SOF was found to have
been applied in the majority of the cases of sample farmers, however, the place for
the same was found blank in the appraisal form in a few cases irrespective of the
type of the agency (commercial banks, RRBs or cooperative banks). In fact hardly
any appraisal form of any bank was found complete in all respect. Most of the
branch managers opined that due to very high work load in the branch, they hardly
got any time to pay a visit to farmer’s field to verify the cropping pattern being
followed by them. Further, change in cropping pattern was neither reported by the
farmer nor ascertained by the bank in most of the cases while considering the
enhancement in the KCC limit next year onwards.
ANNUAL ENHANCEMENT IN KCC LIMIT

Of total sample of 714 farmers the KCC limit was found to have been enhanced
every year only in 79 cases (11% of sample). The irregular repayment performance
of the borrower was the major reason for not enhancing the KCC limit of the said
borrowers. Non-willingness of both the bankers as well as the famers to go beyond
the KCC limit of Rs. 1.0 lakh to avoid ‘mortgage of land’ in some cases and not
going beyond Rs. 3.0 lakh in some other cases due to non-availability of interest
subvention (available for loan up to Rs. 3.0 lakh) were other very important
reasons for non-enhancement of KCC limits. The practice of adding 10% & 20%
towards consumption & farm maintenance was being followed by commercial
banks and RRBs.
CHAPTER 4
DATA ANALYSIS AND INTREPRETATION

CHARGES LEVIED BY BANKS ON KCC ACCOUNTS

NABARD vide circular dated 13 Sept 2012 had suggested that the processing fee
may be decided by the respective bank. The most common type of charges levied
by the banks were annual charges, inspection charges, processing charges, ledger
folio charges, cash handling charges, ATM issue charges, Miscellaneous charges,
SMS charges, etc. These charges were found to be varying from bank to bank, even
branch to branch of the same bank. However, these charges are not very high and
account for less than one percent of total loan disbursed during the year.

NUMBER OF KISAN CREDIT CARDS WITH A FARMER

Some of the farmers had taken KCC from more than one bank, normally one from
cooperative bank and the other from either a commercial bank or a regional rural
bank. Such farmers, despite average loan sanctioned by cooperative banks being
quite less, still preferred to have KCC from cooperative bank just to get good
quality fertilizer and seed, etc.

IMPACT OF KCC ON FARM INCOME

The average farm income per farmer as well as per acre of KCC holders was
compared with that of Non-KCC farmers in order to arrive at the gain from KCC
financing. The farm income per household and per acre in case of KCC farmers
was estimated at Rs. 1, 49,060 per farmer which translated into Rs. 26,809 per acre
(avg land holding 5.21 acre) on the KCC sample farms. The farm income per
household and per acre in case of non-KCC farmers was estimated at Rs.
69,850 per farmer which translated into Rs. 21,346 per acre on the KCC sample
farms (avg land holding 3.04 acre). The average gain per acre on account of
KCC loan comes to Rs. 5,463 with minimum gain of Rs. 858 in Akola district of
Maharashtra and maximum of Rs. 13,657 in Moradabad district of Uttar
Pradesh. While the income net of interest burden was as high as Rs. 13188 per acre
in Moradabad district, the farmers of Akola (net income was (-) Rs. 366/ acre) and
Bellary (net income was (-) Rs. 359/ acre) were not able to liquidate interest
burden of KCC. However, with the support of 2% interest subvention to banks and
3% incentive on prompt repayment, all the farmers including those of Akola and
Bellary were able to generate some gain over non-KCC farmers. The average gain
in net income of KCC farmers over non-KCC farmers was estimated at Rs.
2974/ acre when 2% interest subvention was taken into account and a gain of Rs.
3548/ acre when calculation was made assuming all farmers would be repaying
their dues within the stipulated time period. The overall impression is that the
implementation of KCC scheme has certainly benefitted to agriculturists albeit in
varying magnitude to different farmers depending upon the availability and quality
of land resources and their capacity to manage various resources.

ISSUANCE OF RUPAY/ DEBIT CARDS BY BANKS TO KCC

BORROWERS.

To achieve the objectives of financial inclusion, NPCI has facilitated a sub

membership model for smaller cooperatives (State Cooperative, District
Cooperative, Regional Rural Banks) where they can use National Financial
Switch (NFS) infrastructure under sub membership with a direct member bank
with NPCI. As on March 2016, NPCI had 96 banks as Direct Members by paying
fess of Rs. 3.0 lakh (with 204904 ATMs on NFS), 461 banks as a sub member bank
(with a certification charge of Rs. 75000) and 56 RRBS and 7 banks with white
label ATMs.

PROGRESS MADE SO FAR IN ISSUANCE OF RUPAY CARDS: MACRO

PICTURE

As per the data provided by the NPCI (March 2016), 146 BINS have gone live out
of total 172 Issuer Identification Number-IINs/ Bank Identification Number-BINs
issued to 154 banks. The transactions were yet to be started in case of 08 BINs.
The bank-wise progress indicated that 56 out of 59 BINS to 56 RRBs, 46 out of
56 BINs to 56 DCCBs, 21 out of 23 BINs to 21 Public Sector Banks, 6 out of 10
BINs to 10 Private Sector Banks, 5 out of 10 BINs to 5 Associate banks of SBI and
4 out of 6 BINs to 6 State cooperative banks had gone live as on 15 July 2016. The
progress of cooperatives banks is quite slow as only 56 banks out of 371 DCCBs &
6 out of 33 St CBs have been issued BINs because of their inherent weaknesses
relating to ICT.
The bank-wise analysis of KCC transactions for the period Sept 15 - Feb 2016
indicated that 23 Public Sector Banks together account for 55.4% of total RuPay
KCC transactions followed by RRBs (53 functional) which together accounted for
another about 39 per cent. Ten functional DCCB out of total 56 DCCBs which
have been issued IIN/ BIN together account for just 2.2 per cent of the total RuPay
KCC transactions. An analysis of scale of uses & market share (as on 15 July
2016) of three card payment systems indicated that National Financial Switch
(NFS)/ ATMs dominated the KCC transactions accounting for as high as 99.10 per
cent followed by Point of Sale (POS) devices at 0.85 percent and the RuPay Pay
Secure (E-Commerce operations), which was launched on 21 June 2013, has a very
negligible share of 0.05 per cent.

ISSUE RELATING TO INTEROPERABILITY

The RuPay Kisan Cards are acceptable at all the 220912 ATMs of all the banks
across the country. Any ATM proposed to be installed by banks and connected to
the National Financial Switch operated by National Payments Corporation of India
accepts the RuPay Kisan Cards issued by any Bank. The KCC will function
smoothly as long as the issuing bank is certified by NPCI to use the card.

As far as interoperability of RuPay Cards/Kisan cards on Micro-ATMs are

concerned, it has gone live for 8 banks and the work is in progress in case of other
11 banks. Except these 19 banks, all other banks are yet to approach to NPCI for
making their RuPay cards interoperable on Micro-ATMs/POS.

EXTENT OF COVERAGE UNDER RUPAY CARDS

At the All India level, the progress of issuance of RuPay Cards is quite slow as
only 12.2 per cent of live KCC accounts have been issued the RuPay cards. The
agency-wise analysis of coverage of operative KCC accounts by smarts cards is
highest in case of Commercial banks (33.8%) followed by RRBS (11.2%). This
percentage is very negligible in case of cooperative banks at 0.06 per cent of the
total Kisan cards operative with cooperative banks.
As reported by sample bank branches, on an average, the number of RuPay Card
received at branch from their controlling offices as per cent of number of KCC
A/c outstanding stood at 32 per cent which was ranging from 10% (UP) to 69%
(Maharashtra).
As far as issuance of RuPay cards to sample farmers is concerned, it was observed
that only 193 out of 714 sample farmers (27%) had got/ taken RuPay cards and the
rest 521 farmers were either not issued or had not taken the RuPay cards from the
bank.
39. Only one third of the farmers who were issued RuPay cards were using the
RuPay cards on ATMs. Further, about 57 per cent of farmers using RuPay Card
used to take the help of their family members, mostly the son or daughter, to
operate on
ATM machine.
The reasons for gap between the numbers of KCC accounts with the bank
branches vis-à-vis number of KCCs issued to farmers and number of RuPay cards
handed over, as opined by the branch managers, were mainly (i) controlling offices
not making available the RuPay Cards in sufficient numbers or delay in supplying
the cards to branches (ii) bankers were averse of issuing RuPay cards to NPA and
other irregular accounts (iii) bankers were of the view that both the bankers as well
as farmers don’t see much utility of RuPay Kisan Debit Card as a banking product
because once the KCC loan is approved by the bank and credited to the farmers
account, the farmers prefer to withdraw the entire amount from the bank in just one
or two withdrawals (iv) given the choice, the bankers willingly don’t extend KCC
loans to unviable holding, but the pressure from the government makes them cover
the agricultural farmers under KCC loan (v) the illiterate farmers don’t feel
comfortable in doing transactions at ATM machines and they were also afraid of
misuse of their cards even by their family members (vi) as of now, neither ATMs
nor POS machine are available in sufficient number and also, vendors are finding it
difficult to supply the cards in time and they normally take 6 to 8 months to supply
the chip based cards. (vii) Absentee landlords/ farmers not residing in the villages
were not very keen in getting RuPay Card issued (viii) the bank/ branches not
having ATMs of their own bank were of the view that extending RuPay cards to
every farmers would add an extra expenditure to them if the farmers go beyond the
minimum number of free transactions (five) allowed on ATMs of other banks.

MACRO ESTIMATES OF BENEFITS FROM KCC FINANCING

The total crop loan issued through KCC during the 2014-15 was Rs. 6, 35,412
crore which translated into a crop loan of Rs. 85,757 per live KCC account. The
average crop loan disbursed per account came to Rs. 31,923. The agricultural
cropped area covered by KCC (arrived at by multiplying 7.41 crore operative KCC
accounts with the average size of holding 1.15 ha) has been estimated at 85.208
mill ha (241.99 mill acre). The net farm income net of interest (9% per annum on
Rs. 6, 35,412 crore) has been estimated at Rs. 62,670 crore which clearly indicates
that availability of credit from institutional sources through KCC mode has made
significant contribution to the farm income of the farmers. 42. Gross increase in net
farm income per annum (net of interest burden) of all the KCC holders in the
country due to interest Subvention (i.e. KCC loan at 7% per annum) to eligible
farmers had been estimated at Rs 71,968 crore. And if all the farmers repay their
loan in time, the gross increase in net farm income (net of interest burden) will go
up to Rs 85,858 crore.

IMPLEMENTATION OF REVISED KCC SCHEME

SOCIO-ECONOMIC PROFILE OF FARMERS

Some important socio-economic features of farm business of the sample farmers

(714) are discussed in this chapter. The features covered in this chapter pertains to
occupational pattern, literacy level, size of holding, size of family and farm family
labour available therein, cropping pattern, cropping intensity, average yield rates &
prices of different crops, average per acre gross value of production, cost of
cultivation and average per acre net return, etc.
It can be seen from Table 3.1 that farmers belonging to SC/ST community
accounted for 8 percent of the total KCC farmers selected for the study. Farmers
having education of graduation and above accounted for 13.4 percent of the total
sample. The average family size of the sample farmers was 5.66 and the average
number of family members engaged in farming came to about 1.56 members. As
many as 58 families out of total 714 (8 percent) reported to be going for MNREGA
works. Also, 52 KCC farmers reported that at least one of their family members
was a member of a SHG or JLG or Farmers Club.

LAND OWNERSHIP BY SAMPLE FARMERS

The average size of holding across the sample came to 5.21 acres of which about
64 percent was irrigated. About 4.5 percent of sample farmers had leased out some
portion or their entire holding on account of their engagement in other occupation
service/ business or their absenteeism from the location. As many as 80 farmers
(11.2% of the sample) were reported to have leased-in some additional land either
to make optimum use of resources available with him or to meet out their
consumption needs. Quite a good number of sample farmers (25%) owned tractors.
Pump set is another important farm asset which was owned by about 51 per cent of
the sample farmers. Sources of Income: Sample Farmers The average income per
farmer per annum (Table 3.3) across the total sample came to Rs. 213687 and was
varying between Rs. 68180 (Darrang, Assam) to Rs. 585671 (Kapurthala, Punjab).
Cultivation (66.7% of total income) was reported as the major source of income of
farmers selected for the study. Income from livestock farming accounted for 9.9
per cent of total income of the farmers. Other sources (other than farming,
livestock, wage employment, service & Business) accounted for about 11.3 per
cent of family income of the farmers. Other sources included self-employment
activities viz., remittances from foreign, Aadatia, tailoring, etc.
IMPLEMENTATION ASPECTS OF KISAN CREDIT CARD (KCC)
SCHEME

In the present section, an attempt is made to assess whether the revised Kisan
Credit Card Scheme is serving its intended purpose or not. Although the progress
in issuance of Kisan Cards has already been discussed in chapter-2 highlighting the
year-wise growth as well as agency-wise & state-wise distribution of KCC issued.

The overall impression is that a good progress has been made by the banks in the
issuance of Kisan cards to the needy farmers. However, some gap between number
of agricultural households and number of farmers cover under the revised
guidelines on implementation of KCC Scheme was circulated to RRBs and
Cooperative Banks by NABARD vide Circular No 71/PCD 04/2011-12 dated
29.03.2012 and to commercial banks by RBI vide circular number RBI/2011-
12/553; RPCD.FSD.BC.No.77/05.05.09/2011-12 dated 11 May 2012. The field
observations on implementation of various provisions of the revised KCC circular
are presented in the following sections. Awareness of Branch Managers about the
Revised KCC Scheme 3.9 A total of 71 bank branches covering 24 branches of 10
commercial banks, 25 branches of 11 RRBs and 22 branches of 11 DCCBs/ Apex
Coop banks were covered in the present study. All the Branch Managers were
interviewed to get their feedback on implementation of the KCC scheme.
As far as awareness about revised guidelines on KCC (March/ May 2012) is
concerned, the following observations are made in this regard:
(i) All the 71 Branch Managers were aware that validity of KCC is for five years.
(ii) All the Branch Managers were aware that they had to add 10% and 20% in the
KCC limit over and above the crop loan requirement. It was also clear to them that
10% was towards consumption purpose. However, quite a good number of Branch
Managers were not clear about the exact use of 20% of limit which had to be
extended towards repair and maintenance of farm assets, crop insurance, PAIS and
asset insurance. A few of them were found arguing that unless receipt of work done
in case of repair was shown to the Branch Manager, amount would not be paid to
the farmers. Branch managers were also of the view that most of the small farmers
did not own assets like tractor and pump sets which require regular maintenance
and therefore extending loan to them towards farm maintenance was of no use and
it would not be used for the intended purpose.
(iii) All the Branch Managers were aware that they had to increase the KCC limit
every year by 10 per cent. Although revised guideline had clearly indicated that
this 10% increase in KCC limit every year was towards cost escalation/scale of
finance, however, majority of them were not clear whether this 10 per cent increase
was to be effected even if there was no upward revision in the scale of finance next
year.
(iv) Majority of Branch Managers (>70%) were also not aware that the KCC limit
fixed for a farmer was on the assumption that the farmer would not change his
cropping pattern. In case farmer had changed his cropping pattern, his KCC limit
had to be re-worked out. In fact, not even a single instance of enhancement of KCC
limit on account of change in cropping pattern was observed in the selected
branches during the course of the study.

Fixation of Scale of Finance:

The general approach of fixing the crop-wise Scale of Finance (SOF) in five
(Assam, Bihar, UP, Maharashtra, Karnataka) states was found to be the same and
was limited to expenditure on cultivation of crops only. Further, SOF in these five
states were being prepared for all the districts by District Level Technical
Committee (DLTC) convened by District Central Cooperative Bank of the district
once in a year.
In Punjab, a single SOF was being prepared for each crop for the entire state and
notification was issued by the Registrar, Cooperative Societies (RCS). Further, the
SOF included expenditure on the cultivation of crops (Cash & Kind separately),
additional 10 per cent of it towards post-harvest/ household/ consumption
requirement and additional 20 per cent towards repair and maintenance of farm
assets and insurance.

In majority of the districts, SOF was given as a fixed amount for various crops.
In some districts (e.g. Gaya & Begusarai in Bihar, Moradabad in UP), SOF was
prescribed as a range instead of a fixed amount.
Application for KCC loan & Appraisal by Branch Managers
A total of 32 banks (Comm -10, RRBs -11 & Coop -11) were covered in the
present study. All the banks have developed a unique ‘application cum appraisal
form’ for appraisal of KCC loan application keeping in view the specific
requirement of the banks. Although some of the features viz., family and land
detail of the farmer, were common in the formats of all the banks, most of the other
features viz., appraisal format, credit scoring sheets, calculation of farm income
& expenditure, guarantor’s consent form, mortgage format, sanction note, etc.
we’re varying to a great extent from bank to bank.
Some banks had already re-designed their application cum appraisal format
keeping in view the revised KCC guidelines (March/ May 2012) clearly indicating
year-wise/ component-wise sub-limits of the KCC limits. However, majority of
banks were yet to include calculation sheet for arriving at the KCC limit and year-
wise/ component-wise sub-limits. There were few banks (e.g. Bihar Gramin Bank)
which had also printed the ‘scale of finance’ in its KCC application form. Fixation
of Kisan Credit Card Limit

CROPPING PATTERN
‘Cropping Pattern’ is one of the important determinants for arriving at the KCC
limit of the farmer. As observed from the application cum appraisal form of the
sample farmers, in 434 cases (61% of the sample), KCC limits were fixed taking
into account both Kharif as well as Rabi crops. In rest of the cases, either only
kharif crop (35% of the sample) or only Rabi crop (4% of sample) were considered
for fixing of KCC limit. It was observed that almost similar type of cropping
pattern was shown for majority of the farmers in a particular bank branch which
speaks about the non-seriousness in filling up the appraisal form. Further, the
fixation of KCC limit assumes that the cropping pattern adopted by the farmer
during the first year would remain unchanged during the next four years. Although
KCC guideline allows for change in KCC limit on account of change in cropping
pattern, it was observed that no change in KCC limit was effected on account of
change in cropping pattern of anyone of the sample farmers.
‘Scale of Finance’ (SOF) is another important parameter for the fixation of KCC
limit. The SOF was found to have been applied in the majority of the cases of
sample farmers, however, the space for the same was found blank in the appraisal
form in a few cases irrespective of the type of the agency (commercial banks,
RRBs or cooperative banks). In fact hardly any appraisal form of any bank was
found complete in all respect. Many farmers interviewed were not aware of the
benefits of KCC, such as composite loan facility, annual enhancement, etc., and
therefore, farmers were having liberty of fixing the KCC limit as per their choice.
In Uttar Pradesh, although DCCBs were preparing the KCC loan limit for five
years including crop loan, consumption and maintenance components; the actual
disbursement was restricted to multiple times of the share capital deposits of
respective PACS with the DCCB (maximum Rs. 1.0 lakh). Further, 75% of the
KCC sanctioned were being disbursed as cash component as the remaining 25% as
kind component and the farmers were issued two separate cheque books for
withdrawing the cash and kind components, separately. The cheque for kind
component was required to be deposited with the PACS in lieu of seeds or
fertilizers purchased. This practice was defended by the DCCB officials who
informed that unless this was ensured the PACS would lose crucial business as
around 2.5% of the fertilizer sales proceeds was being credited to the salary
38 account of PACS Secretaries and conveyance expenses of PACS, in the ratio of
85:15. Further, the Government of UP had issued instructions that all KCC loans
for sugarcane cultivation would be disbursed only from Cane Societies and not
through DCCBs/PACS. Since number of Cane Societies in certain areas were at
distant places, the farmers had to travel a long distance to avail crop loan for
sugarcane cultivation. These instructions also facilitated multiple financing of crop
loan on the same piece of land.

VERIFICATION OF CROPPING PATTERN BY BRANCH MANAGERS

The Branch Managers (BMs) of financing banks are supposed to visit the farmers’
field to ascertain/verify the cropping pattern being followed by them in order to
arrive at a reasonable KCC limit. Most of the branch managers opined that due to
very high work load in the branches, they hardly get any time to pay a visit to
farmers’ field to verify the cropping pattern being followed by them. Since they
(BMs) had fairly good idea about their area of operation, they normally come to
know the genuineness of the claim of the farmers. BMs also try to cross verify the
information from other farmers/ account holders of the same village. Some Branch
Mangers told that they did not make special effort to visit the farmers’ field, but
whenever they got a chance to visit a village they discussed with the villagers and
tried to ascertain the required information. Further, change in cropping pattern was
neither reported by the farmer nor ascertained by the bank branches while
considering the enhancement in the KCC limit from next year
ANNUAL ENHANCEMENT IN KCC LIMIT
The revised guidelines on KCC indicates that there has to be annual enhancement
of KCC limit by 10 percent to take care of cost escalation/ increase in scale of
finance. An attempt was made to see whether the guideline was actually followed
at the ground level or not.
In as many as 267 (37% of sample), the KCC limit was either renewed during the
last two years (so record was not available for earlier years) or the KCC loan was
sanctioned to the farmer for the first time by this bank branch. In all these cases, no
enhancement in KCC limit was observed even though the KCC was sanctioned
two years back. The analysis of bank statement of all the sample farmers (714)
indicated that the KCC limit was found to have been enhanced every year only in
79 cases (11% sample) and the limit was enhanced only once in another 114 cases
(15% of the sample). In all other 521 cases (73% of sample), no enhancement in
credit limit was effected during the last three years. The reasons for no
enhancement of KCC limit of sample farmers as reported by the Branch Managers
as well as ascertained from the sample farmers and also visible from the operations
of their KCC loan accounts, the irregular repayment performance of the borrower
was the major reason for not enhancing the KCC limit of the said borrowers. Non-
willingness of both the bankers as well as the farmers to go beyond the KCC limit
of Rs. 1.0 lakh if it was close to this amount as both the parties preferred to avoid
‘mortgage of land’ which is applicable for loan above Rs. 1.0 lakh. Similarly, if
loan amount contemplated was close to Rs. 3.0 lakh, both the farmers as well as
bankers preferred to restrict it at Rs. 3.0 lakh since interest subvention is available
for loan up to Rs. 3.0 lakh. Provision of 10% of crop loan limit towards post-
harvest / household / consumption requirements + 20% of limit towards repairs and
maintenance expenses of farm assets + crop insurance, PAIS & asset insurance.
The revised guidelines on KCC has suggested to include the above two
components in the maximum permissible KCC limit. The practice was observed to
be followed by commercial banks and RRBs, to some extent but as an academic
exercise only, since in majority of the cases, the exercise of fixation of KCC limit
was done just to satisfy the norms laid down in the guidelines. For example, a
comparison of KCC limit arrived at by following the usual approach as mentioned
in the guidelines (the desired limit) and the actual KCC limit fixed in case of
sample farmers in Punjab indicated that there were only 5 out of 120 cases where
both the figures were almost same (difference of within Rs. 5000). In other 76
cases, the actual KCC limit fixed was less than the desired limit and in the rest 39
cases, the actual limit fixed was higher than desired KCC limit. In other states too,
the observations were on the similar lines. The reasons for the same as gathered
from bankers and the borrowers are as under:
(i) In quite a good number of cases, there was already a consensus between the
Branch Manager and the farmer on the amount of KCC limit to be fixed for the
said farmer and normally the same amount was being specified by the farmer on
the KCC application form. Sometimes the farmers themselves did not want a
higher limit than the amount specified by him and in other cases, it was the branch
managers who informally conveyed to the borrower about their unwillingness to
fix the KCC limit beyond a certain amount. The same was observed from the
application cum appraisal forms where it 40 was clearly visible that the quantum of
land offered for KCC, the cropping pattern indicated therein, and the scale of
finance for the crops specified were written in a very causal manner or some of the
items were not even recorded/ missing in the appraisal form.
(ii) As already indicated in para 3.22, sometimes the exercise of calculating the
KCC limits turns out to be futile when a cap of Rs. 1.0 lakh is put to avoid land
mortgage or a cap of Rs. 3.0 lakh is imposed by the farmers themselves due to non-
availability of interest subvention beyond this amount. Another issue with the land
mortgage was that banks were mortgaging the entire land offered by the farmer for
KCC loan irrespective of the value of the mortgaged land. Banks should take into
the account the value of land vis-àvis the quantum of security/ collateral required
to secure the loan (over and above Rs. 1.0 lakh). Therefore, some farmers were
hesitant to avail KCC loan beyond Rs. 1.0 lakh.
(iii) Since the components of consumption & asset maintenance were not eligible
for interest subvention and were fetching higher rate of interest as compared to
crop loan component, these components were required to be shown by the banks
either in a separate account or as a sub-limit of KCC limit. However, the same was
not being practiced by the bankers. The bankers opined that since the CBS
platform used by various banks (banks visited by the study team) did not have the
option of sub-limit within the overall KCC limit, it was not possible for them to
keep separate records online for crop loan component and consumption cum asset
maintenance component. Therefore, the KCC limit sanctioned to the farmers was
either exclusive crop loan limits (if other two components were not considered/
sanctioned) or a cumulative of crop loan plus consumption plus asset maintenance
and the entire amount was shown as ‘crop loan component’.
(iv) Non-satisfactory recovery of loans was also observed to be one of the major
reasons for not sanctioning KCC beyond a limit. In UP, State Government had
issued a notification that if land was required to be sold by the banks for recovery
of dues, the farmer should be left with a minimum land parcel of 3.15 acre.
However, since majority of farmers in the state were marginal and small farmers,
banks could not get the required permission from the Tehsildar to sell the land of
the farmers to recover their dues.
Season-wise crop loan limit was being fixed by the cooperative banks in all the
states selected for the study. This was normally done because of resource crunch at
the DCCB level as also to ensure better recovery of dues from the farmers.
Although some commercial banks & RRBs in UP and Assam had also indicated
the season-wise crop loan limits in the KCC loan application cum appraisal forms,
the same was not being practiced in operations. In fact, the DCCBs in Bihar were
not allowing farmers to withdraw entire limit at a time.

Personal Accident Insurance Scheme (PAIS)

It was reported by the bank branches visited in Assam, Bihar, UP and Punjab states
that they had covered almost all the loaned borrowers under PAIS, but sometimes
they forgot to debit the premium in case of non-regular borrowers who didn’t visit
banks for long. In Maharashtra, farmers were being covered under PAIS by
Vidharbha Konkan Gramin Bank (VKGB) and Bank of India but the Central Bank
of India (CBI) the DCCBs were not covering their farmers under the PAIS. In case
of Karnataka also, all the banks were implementing PAIS
Scheme except the DCCBs. Although Branch Managers of DCCB in Karnataka
state told the study team that it was being implemented by them but the study team
could not ascertained the same from the loan ledgers of the farmers as whether
premium towards PAIS was debited or not. In fact, the practice of debiting the
premium towards PAIS varies from bank to bank and most of time from branch
manager to branch manager also. Although, instructions/ circulars were there from
the controlling offices, all the Branch Managers didn’t act in a similar fashion due
to their ignorance or some other reason.

Crop Insurance Scheme

The crop insurance scheme is being implemented in all the states covered in the
present study except Punjab. Since Crop Insurance is a matter of solicitation,
therefore, bankers cannot insist too much to farmers to avail the crop loan.
However, it was observed that many illiterate farmers didn’t have knowledge about
the PAIS and crop insurance scheme. In fact, most of the time, the bankers debit
the premium amount towards PAIS and crop insurance without the knowledge of
the farmers. In Assam, most of farmers were not covered under crop insurance
scheme by the Mangaldoi branch of PNB and Darrang branch of Assam Coop
Apex Bank (except in few cases). In Jorhat district, WBCIS was issued in cases
where bank was allowing crop insurance, although no indication of crop insurance
could be noticed from the loan ledgers of the selected farmers. According to the
bankers, the premium was debited from their savings accounts. The other banks are
doing it but not in all cases.
In Bihar too, although all banks were implanting the crop insurance scheme, but
the bank statements indicated that many a times’ premium was not debited to the
farmers’ account. In UP, the crop insurance scheme was in operation except in case
of Prathama Bank (RRB) & Syndicate bank in Moradabad district. The banks
indicated that farmers were not very keen to go for crop insurance since claim
settlement was very tardy. As reported, Reliance was the Insurance provider for
Sambhal & Amroha in Moradabad district, which used to return the insurance
premium if the same does not reach to it by 30 June (Kharif) & 31 Dec
(Rabi), despite the issue having been taken up by DLRC. Punjab and Arunachal
Pradesh are the two states who are not implementing the crop insurance scheme. It
is learnt from the newspapers that Punjab is also not very happy with the recently
announced ‘Pradhan Mantri Fasal Bima Yojana’ (PMFBY) which is hailed as one
of the most farmer-friendly crop insurance scheme. The PMFBY provides an
indemnity level of 90 per cent whereas the average loss of major crops, wheat and
paddy in Punjab is estimated between two per cent and three per cent and
therefore, the farmers of Punjab would not benefit from this scheme. As per a
report (Business Standard, 06 Feb 2016), in a written submission to the Union
ministry of agriculture, the state has sought the indemnity level to be raised to 95
per cent and the insurance premium to be scaled down to one per cent from the
present level of 2% (kharif) and 1.5% (Rabi). The state demands that the insurance
scheme should cover the produce lying in market yards, waiting to be bought by
agencies. In the state of Maharashtra, the crop insurance is being implemented by
differentbanks in different magnitude. For example, Vidharbha Konkan Gramin
Bank
(VKGB) & Central Bank of India were doing crop insurance in Akola and
Sidhudurg but in a varying magnitude. The scrutiny of bank statement of farmers
financed by Bank of India indicated that they had not debited the KCC loan
towards crop insurance premium.
In Bellary district of Karnataka state, Branch Managers informed that they had
collected the premium from farmers in respect of notified crops and forwarded the
same to the concerned Insurance Company. However, the farmers visited/
interacted had not grown the notified crop and hence had not paid insurance
premium. However, the DCCBs (PACS) visited had neither collected the premium
nor sent any amount to the Insurance Company, as farmers had not shown any
interest towards the same and opposed the collection of premium. In Dakshin
Kannada district, none of the banks visited were reported to be implementing the
crop insurance scheme.
Many bankers indicated that it became very difficult as which crop was to be
insured since only a few crops were notified for crop insurance. So there was a
conflict of interest between the bankers and the borrowers. The borrowers wanted
to show high value crops in their cropping pattern to get sanctioned a higher KCC
loan limit irrespective of the crops being grown by them and the bankers to oblige
some farmers keeping in view the credit worthiness of those farmers. However,
when it came to the claiming the crop insurance, the same had a problem.

Quantum of KCC loan

A huge difference in the quantum of KCC limit sanctioned to farmers across the
sample states was observed. The minimum amount of KCC loan was varying from
Rs. 5,000 in Bihar to Rs. 25,000 in Karnataka and the maximum amount
sanctioned was ranging between Rs. 82,600 in Assam to Rs. 25.0 lakh in Punjab in
case of sample borrowers. The maximum KCC limit sanctioned to a borrower by a
cooperative bank was found to be quite high in Punjab, Maharashtra and Karnataka
states. The highest loan limit in case of sample farmers was Rs. 17, 00,000 by
Malvan branch of
DCCB, Sindhudurg followed by Rs. 4, 71,900 by Jalal branch of DCCB, Bathinda,
Punjab; Rs. 3, 51,000 by DCCB, Kapoorthala, Punjab; Rs. 3, 10,000 by DCCB,
Akola, Maharashtra, Rs. 3, 58,000 by DCCB, Dakshin Kannada and Rs. 2, 90,000
by DCCB, Bellary.
In Assam, Bihar and Uttar Pradesh, the story was just opposite to that observed in
other three states. The maximum KCC limit fixed to any farmer was Rs. 3.0 lakh
(Uttar Pradesh). The comparison of loan amount assessed during the appraisal and
the actual loan disbursed to the farmer indicated a huge difference between the
two. For example, the KCC loan assessed in case of (A/c No 001671000000461)
was Rs. 3.89 lakh but the loan outstanding never went beyond Rs. 70,244.
Similarly, KCC loan assessed in case of (A/c No 001621000001599) was Rs. 5.84
lakh but the loan outstanding never went beyond Rs. 99,900. In Uttar Pradesh,
cooperative banks disbursed 75% of credit limit as cash and the remaining 25% as
kind towards fertilizer, seed, etc. In Bihar, Begusarai DCCB provided the KCC
loan maximum of Rs. 50,000 per farmer (circular No 198 dated 18.03.2016).
Similarly, Magadh DCCB was providing maximum KCC loan of Rs. 82,500 to a
farmer having 5.0 acre of land. In Assam, the maximum loan amount to a farmer
was found to be Rs. 82,600.
In fact, it was reported by the officials of some banks as well as the farmers
interviewed that HDFC Bank was providing KCC as per the valuation of land
ignoring the Scale of Finance. The HDFC Bank has Agri Business Centre/branch at
Rudrapur, Uttarakhand and Bareilly, UP. Since the land value is very high in
Moradabad and Bijnore, the KCC sanctioned is much higher than what they would
get from Public Sector CBs, RRBs or DCCBs, who apply SOF for calculation of
KCC, and also the repayment capacity of farmers.

Collateral Security
As suggested in the revised KCC guidelines, no collateral security was being
forced by the banks for KCC limit up to Rs. 1.0 lakh as reported by the sample
farmers. However, the banks were insisting land mortgage for KCC limits above
Rs. 1.0 lakh in all the states. There were a few cases where land mortgage or other
types of collateral were not taken for KCC loans above Rs. 1.0 lakh (but not in
cases where loan amount was quite high). It was observed that banks were
mortgaging entire land which were recorded in the Land Possession Certificate
(LPC) or offered by the farmer for KCC loan and these were found to be very high
as compared to the quantum of loan. This practice was very common in almost all
the banks. Banks should mortgage only that much quantity of land value of which
should be able to cover the loan amount. There were some other issues pertaining
to the land records too. In the state of Bihar, Maharashtra and Uttar Pradesh, delay
was observed in updating the Khatauni (the register of all households cultivating or
otherwise occupying land in a village as prescribed according to the State Land
Revenue Rules). It is a document prepared as part of record-of-rights but not
always done on real time basis on ‘Bhulekh’ (the online Land Record system for
Uttar Pradesh, being implemented under the National Land Records Modernization
Programme).
Accordingly, there are instances of mismatch between the physical records and
online records, since the mutation on transfer of property, which should officially
be done within 35 days, normally takes two to three months. The manual khatauni
is maintained by the lekhpal and land registration is done by the tehsil office,
which takes about two months. Then the details are forwarded to the Revenue
Department, once in 15 days, which undertakes online registration. Therefore, if a
farmer sells a parcel of land immediately prior to applying for KCC, it becomes
difficult for the bank to ascertain the accurate record of rights. Therefore, in all
cases, banks in the district/State, appoint advocates to do a thorough search. The
charges of Rs. 600/- to Rs. 700/- (at the time of loan renewal, the charges are Rs.
200/-), are loaded on to the farmers, who protest the additional charges levied by
the bank. Similarly, the same is also true with the availability of ‘Khasra’ (detail of
all the fields with its measurement, name of owners, crops being cultivated on it)
which should normally be provided by the Lekhpal free of cost.

Composite Loan
The KGSGB indicated that they were not in a position to provide composite loan
under KCC since there were instructions to the contrary. The Karnadandi branch of
KGSGB indicated that they were required to open separate accounts for crop loan,
tractor financing, dairy, etc., as the Finnacle CBS software does not allow interest
calculation separately for crop loan and ATL, i.e., at different rates of interest.
These observations were made by UBI, Prathama Bank and Syndicate Bank also.

Rate of Interest
The ultimate rate of interest charged by banks to KCC farmers for loan up to
Rs. 3.0 lakh was governed by government policy of interest subvention and
incentives for prompt repayment. As of now, Government of India is providing
2 per cent interest subvention to banks to enable them to provide KCC loan to
farmers at 7 per cent. In addition to subvention, GOI also provides an incentive of
3% to farmers who repay their loan promptly i.e. within the due date. Some
State Governments provide an additional subvention to banks and incentive to
farmers in addition to what GOI is providing. The additional interest subvention
and additional incentives given by state governments, if any, is presented in Table
The rate of interest on KCC loans above Rs. 3.0 lakh and agricultural term loan by
the banks covered in the present study in presented in Table 3.10. It is observed
from the Table that there was not much difference in the interest rate between KCC
loan above Rs. 3.0 lakh and term loan for agriculture & allied activities. However,
the comparison of interest rates presented indicates that there was a very large gap
in the interest rate being charged on KCC loan up to Rs. 3.0 lakh and all other loan
components. Therefore, the farmer’s choice of restricting KCC loan to Rs. 3.0 lakh
even if a slightly higher amount was required, can be understood.

Charges Levied by Banks on KCC Accounts

The revised KCC circulars by NABARD (Circular No. 71/PCD 04/2011-12 dated
29 March 2012 to RRBs & Cooperative Banks Commercial Banks and Circular
No. 97/PCD 10/2012 dated 20 April 2012 to Commercial Banks) suggested that no
processing fee should be charged for loan up to Rs. 3.0 lakh. However, NABARD
again modified the instruction on this issue vide circular No. NB 228/ PCD-
25/2012 dated 13 Sept 2012 and suggested that the processing fee may be decided
by the respective bank. The most common types of charges levied by the banks
were annual charges, inspection charges, processing charges, ledger folio charges,
cash handling charges, ATM issue charges, Miscellaneous charges, SMS charges,
etc. These charges were found to be varying from bank to bank, even branch to
branch of the same bank. However, these charges are not very high and account for
less than one percent of total loan disbursed during the year. Coop Banks 12.5 NA
10.7 11.5-13.5 13-13.5 NA Number of Kisan Credit Cards with a Farmer during
the field visit, it was gathered that some of the farmers had taken KCC from more
than one banks, normally one from cooperative banks and the other from either a
commercial bank or a regional rural bank. As such there is nothing wrong in it
since these farmers have offered a portion of their total land to one bank and the
other portion to the other bank. Such farmers, despite average loan sanctioned by
cooperative banks being quite less, still preferred to have KCC from cooperative
Bank just to get good quality fertilizer and seed, etc. However, the farmers were
reluctant in revealing their availment of KCC loan from multiple sources. For
example, 4 farmers having KCC with Sherghati branch of Magadha DCCB, Bihar
indicated that they had KCC from some other banks too -Mr. Manoj Kumar (A/C
00515008000599) with MBGM, Karanauli branch; Mr. Shailesh Kr Sinha (A/c
000515008000997) with Bank of Baroda; Mr. Dilip Kumar (A/c
000515008100277) with Bank of Baroda; Mr. Khairat Ahmad also with Bank of
Baroda.
Some farmers in Moradabad and Bijnore districts of UP who had large farm
holdings, were also having more than one KCC. For example, Ashok Kumar,
(DCCB, Surjannagar) who had 9 acres was eligible for loan of Rs. 4.5 lakh, but
since there was no interest subvention beyond Rs. 3 lakh, he had availed two
KCCs, one from HDFC Bank, Kashipur branch and another KCC from DCCB
Moradabad. In fact, the farmer indicated that the private bank disbursed the loan in
less than a fortnight whereas the DCCB took about six months, and imposed
additional conditionality of cash and kind component, and fixed the repayment
date as 30 June. Similarly, Naubhar Singh also had two KCCs, for his 9 acre
landholding, Rs. 3.00 lakh from Prathama Bank & Rs. 0.50 lakh from DCCB
Moradabad.
48 Ever Greening of accounts
In some of the KCC accounts, the repayment of earlier loan by the farmer and the
disbursement of the new loan was found to had been done either on the same day
or within a gap of one or two days and both the amounts were almost same in
majority of the cases, clearly indicating the case of book adjustments. Although
such cases were noticed in almost all the banks in all the states, but the number of
such cases were not many. A few examples of repayment and withdrawal of
KCC loan on the same day is given below:

IMPACT OF KCC ON FARM INCOME

A comparison of farm income between KCC holders and Non-KCC farmers was
made to assess the impact of KCC financing on the income of loanee farmers. The
assessment of farm income was made for the agricultural year 2015-16. The
agricultural years 2014-15 and 2015-16 were not a normal year due to deficient
rainfall for two years back to back. The monsoon rainfall, between June and
September, was 14% below normal in 2015-16 and 12% deficient in 2014-15. As
far as growth of agriculture sector is concerned, the agriculture sector was
estimated to grow 1.2% in 2015-16, better than the (-) 0.25% seen in the previous
fiscal (NITI Aayog in Economics times 31 Mar 2016). that agricultural income was
higher on KCC holder’s farm as compared to that on non-KCC holders, in varying
amount. It may be concluded that the KCC scheme has certainly benefitted to
agriculturists albeit in varying magnitude to different people depending upon the
availability and quality of land resources and the capacity of the farmer to manage
these resources. The average gain per acre on KCC loanee’ farm over non-loanee’
farm on account of financing through KCC comes to Rs. 5463 with minimum gain
of Rs. 858 in Akola district of Maharashtra and maximum of Rs. 13657 in
Moradabad district of Uttar Pradesh.
Kisan Credit Card Scheme: Macro Impact

The cumulative number of KCC issued since inception till 31 March 2015 comes
to 14.64 crore of which operative / live KCC stands at 7.41 crore. The total crop
loan issued during the 2014-15 was Rs.6, 35,412 crore which translates into a crop
loan of Rs. 85,757 per live KCC account. Since total crop area covered by KCC
loan is not reported by the banks, although the same is recorded in the application
cum appraisal form of KCC loan by the banks, it is difficult to estimate the actual
area for which KCC loan is extended. However, the following estimates are made
in order to arrive at the total benefits accrued to the farmers on account of KCC
financing.

Macro Estimates of benefits from KCC financing Sl Particulars Estimates

1. Number of Operative/ Live KCC accounts as on 31.03.2015 7, 40,94,090

2. Crop loan disbursed through KCC during 2014-15 Rs. 6, 35,412 crore
3. Average crop loan disbursed per farmer during 2014-15 Rs. 85,757
4. Average crop loan disbursed per acre during 2014-15#
(Considering average size of holding in India =2.84 acres i.e. 1.15 ha) Rs. 31923
5. Average increase in farm income per acre due to KCC Rs. 5,463
6. Gain per acre per annum net of interest due to KCC financing (Excess of farm
income of KCC farmers over non-KCC farmers) (Pl see Table 3.10)
6. (i)Gain net of interest burden per acre per annum–
No Subvention (i.e. 9% per annum)
Rs. 2591
6. (ii)Gain net of interest burden per acre per annum– with interest Subvention
(i.e. 7% per annum on loan up to Rs. 3.0 lakh & 9% on above Rs 3.0 lakh)
Rs. 2974
6. (iii)Gain net of interest burden per acre per annum– Prompt Repayment
(i.e. 4% per annum on loan up to Rs. 3.0 lakh & 9% on above Rs 3.0 lakh)
Rs. 3548
Macro Estimates:
7. Estimated agricultural cropped area covered by KCC (7.41 crore operative KCC
accounts multiplied by average size of holding 1.15 ha) 85.208 mill ha
(241.99 mill acre)
8. Estimated area eligible for Interest Subvention (@ 84.3%- Sample data indicates
that 9.2% sample farmers with 15.7% share in land holding were sanctioned loan
above Rs. 3.0 lakh. 71.83 million ha
(204 mill acre)
9. Total increase in farm income of farmers on account of KCC financing $ Rs. 1,
32,199 crore
10. Total increase in farm income ‘net of interest cost’ on account of KCC
financing
10. (i)Total increase in farm income per annum net of interest –No Subvention
(i.e.9%per annum) on total land coved under KCCRs. 62,670 crore
10. (ii)Total increase in farm income per annum net of interest – with interest
Subvention(i.e. 7% per annum on loan < Rs. 3.0 lakh & 9% on above Rs 3.0 lakh)
Rs. 71,968 crore
10. (iii)Total increase in farm income per annum net of interest – Prompt
Repayment (i.e.4% per annum on loan up to Rs. 3.0 lakh & 9% on above Rs 3.0
lakh) Rs. 85,858 crore
Note: (i) ** Since 2% subvention is given to banks so that they lend at 7% to the
farmers, it is assumed that banks would be lending to farmers at 9% in absence of
interest subvention scheme.
(ii) # Average loan per acre disbursed to sample farmers in the study area is Rs.
31,923 per acre per annum.
(iv) The contribution of KCC financing is calculated by taking the increase in farm
income of KCC farmers over non-KCC farmers
The net sown area and the grossed cropped area in India as per the latest figure
available (Pocket Book on Agricultural Statistics, 2014, Min of Agriculture, Govt
of India) are 140.80 million ha and 195.25 million ha, respectively, with cropping
intensity of 138.67 per cent. The agricultural cropped area covered by KCC
financing during 2014-15 has been estimated at 85.21 million ha (7.41 crore
operative KCC accounts multiplied by average size of holding 1.15 ha) which
implies that 60.5 per cent of the net sown area has been brought under KCC fold.
The actual coverage may be a little high or low than this estimate (60.5%) as this
figure is based on number of operative/ live KCC accounts and may have ignored
the number of accounts which were closed during the year. Although, an analysis
based on the cumulative number of KCC accounts opened during last five years
would have helped to cross verify the estimated figure of area (60.5% of net sown
area) covered by KCC financing. The above estimate of coverage of net sown area
under KCC financing (60.5%) appears to be quite comparable if we compare the
same with the ‘Agricultural Census 2010-11’ figure of total number of operational
holdings (13.83 crore) covered by KCC financing (53.6%).The sample data
indicates that 66 farmers (58 in Punjab, 2 in Maharashtra& 6 in Karnataka) out of
total 714 sample farmers (9.2%) were sanctioned KCC loan more than Rs. 3.0
lakh. The average size of holding and average KCC loan sanctioned to these 66
farmers were 13.4 acres and Rs. 8, 83,864, respectively.
The average area not covered under interest subvention and the
average loan sanctioned in case of these 66 farmers were 8.85 acres and Rs. 5, 83,
864, respectively. The area not covered under interest subvention comes 15.7
percent of the total area (3720 acres) of entire 714 sample farmers. Impact of KCC
financing on Farm Income of KCC loanees
The gain in net farm income of KCC farmers over and above the net farm income
of non-KCC farmers (Table 3.12 & 3.13) has been used to estimate the macro
impact of KCC financing on income of the farmers in the country. It may be seen
that the crop loan disbursement of Rs. 6, 35,412 crore during 2014-15 has resulted
in an increase of net farm income of all the KCC loanee to Rs. 1,32,199 crore. The
net farms income net of interest (9% per annum on Rs. 6,35,412) comes down to
Rs. 62,670 crore which clearly indicates that availability of credit from institutional
sources through KCC mode has made a significant contribution to the farm income
of the farmers.
Overall Picture of Issuance of Smart Cards against KCC live accounts, at the All
India level, the progress of issuance of Smart Cards is quite slow as only 12.2 per
cent live KCC accounts have been issued the smart cards. The agency-wise break
up of coverage of operative KCC accounts by smarts cards is highest in case of
Commercial banks (33.8%) followed by RRBS (11.2%). This percentage is very
negligible in case of

CHAPTER 5
FINDINGS AND SUGGESTIONS

FINDINGS

• Performance of KCC Scheme in India Flow of Institutional Credit to

Agriculture and Share of KCC The flow of credit to the farmers through KCCs
was studied from three types of financial institutions, viz. cooperative banks,
regional rural banks (RRBs) and commercial banks.
• The share of KCC in the total amount of loan disbursed to agriculture and allied
sector showed a steady increase during the initial few years of its launch.
• It increased from 31.1 per cent in the year 2000-01 to 41.7 per cent in 2001-02,
but after 2001-02, the total share and respective shares of each agency of
financial institutions declined (Table 1).
• Only two institutional agencies have recorded a positive growth rate for the
amount sanctioned under KCC and it was highest for RRBs (22.4%), followed
by commercial banks (23.5%). BIRD (2000) has also reported that amount
sanctioned under KCC to the total production credit increased during 1998-99
to 2000- 01

SUGGESTIONS
• Present CBS system of most of the banks don’t have provision to bifurcate the
Kisan card limit into separate sub limits of crop loan component, consumption
credit and asset maintenance component. Although, making suitable amendments
in CBS system of banks to facilitate fixation of sub-limits under KCC is a good
option, it is felt that creating multiple accounts for small amounts will not only
increase the number of accounts to unmanageable level but it will also put pressure
on human resources and CBS. It is recommended that the Government should
consider the entire amount of KCC limit (including consumption & assent
maintenance) for interest subvention and incentive for prompt repayment within
the prescribed limits.

• Most of the banks have not revised their ‘application cum appraisal form’ of
KCC loan in line with the provisions under revised KCC guidelines, 2012. The
banks may consider revising their KCC ‘application cum appraisal form’ to suit
with the requirements of the revised KCC Scheme.

• The fixation of KCC limit should be viewed seriously by the bankers and it
should be arrived at by taking into account the cropping pattern and the scale of
finance for the latest year. The role of ‘Scale of Finance’ is sometimes
undermined, particularly in case of cooperative banks when the KCC limits
arrived at by using the scale of finance & cropping pattern are capped by certain
amounts.
• Since the accurate information on coverage of actual number of farmers, as well
as, area covered under KCC is very difficult to estimate, it is suggested that the
10 bankers should also capture information on total land with the farmer,
irrigated land, land offered for KCC loan, land offered for land mortgage, etc.,
in their CBS.

• Digitization of land records must be completed at the earliest possible time.

• The farmers’ reluctance to avail higher amount of KCC limits (above Rs. 1.0
lakh) is also on account of bank’s insistence of land mortgage of entire land
offered for KCC loan. Banks should mortgage only required quantity of land,
sufficient to cover the bank loan.

• Farmers were found less enthusiastic about the crop insurance scheme due to
delay in settlement/ no compensation of claims by the insurance companies.
Further, since crop insurance is available only for notified crops, bankers also
prefer to show only notified crops in the appraisal form while calculating the
KCC limit. But farmers do not get claim when they grow different crops and
loss is occurred during that year. It is suggested that bankers may be little extra
careful while considering the crops being suggested by the farmers for fixation
of the KCC limit, particularly in areas which are prone to natural calamities.

CONCLUSION
As already explained, the bankers’ perception about the major reasons for gap
between the number of smart cards issued vis-à-vis number of operative KCC
accounts with the banks includes the factors like procurement of sufficient number
of RuPay cards by controlling offices and forwarding the same to the issuing
branches, non-issuance of cards to NPA and other irregular accounts, perception of
banks as well as farmers about the utility of RuPay cards keeping in view just one
or two transactions in a year, chances of misuse and fraud restricting the farmers to
accept the RuPay cards, large time being taken by controlling offices in supplying
Chip based cards, extra expenditure on the banks who don’t own an ATM and their
customer will be operating on ATMs of other banks. The farmers’ view about the
utility of RuPay has been eclipsed by their fear of frauds and trust issues i.e.
misused of cards by their family members. Non-availability of ATMs machines in
rural areas, has also been cited as a reason for not availing RuPay card facility by
the farmers. Some of the farmers had declined the offer of availing RuPay Kisan
cards as they did not find it very useful since they were withdrawing the money
just once or twice in year a year.

BIBLOGRAPHY

Atal Pension Yojna...............................................................................................

Interbank Mobile Payment Service....................................................................
(IMPS)
Kisan Credit Card (KCC)..................................................................................
scheme
Land Possession Certificate.................................................................................
(LPC)
Mahatma Gandhi National Rural Employment Guarantee Act.....................
(MNREGA)
National Financial Switch....................................................................................
(NFS)
National Payments Corporation of India.............................................................
(NPCI)
Personal Accident Insurance Scheme.................................................................
(PAIS)
Point of Sale........................................................................................................
(POS)
Pradhan Mantri Fasal Bima Yojana................................................................
(PMFBY)
Real Time Gross Settlement.............................................................................
(RTGS)
Regional Rural Bank...........................................................................................
(RRB)
State Cooperative Banks................................................................................. (St
CBs)
Unique Identification Authority of India............................................................
(UIDAI)
Weather Based Crop Insurance Scheme..........................................................
(WBCIS)
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