The RBI has released new rules for Kisan Credit Card (KCC) Scheme. The Directions shall be applicable to loans sanctioned under the KCC Scheme with effect from January 01, 2027. Loans sanctioned prior to the said date shall continue to be governed by the extant guidelines till maturity / next renewal. The new guidelines are as follows:
KCC Repayment Period
KCC Loan time period has been increased to 6 years.
KCC Eligibility
The following shall be eligible to avail credit for working capital requirements for cultivation of crops: Farmers, Tenant farmers, oral lessees, and sharecroppers; and Self-Help Groups (SHGs) and Joint Liability Groups (JLGs) of farmers / cultivators including tenant farmers, oral lessees, and sharecroppers.
Drawing Power
The drawing limit under the Kisan Credit Card (KCC) scheme is fixed based on the farmer’s crop cultivation and financial requirements. It includes the Scale of Finance (SoF) for the crop, multiplied by the area under cultivation. In addition, 10% of this amount is added for post-harvest expenses and household consumption needs, while another 20% is added for farm maintenance and working capital expenses such as repair of farm assets, soil testing, weather advisory services, digital farming platforms, drone services, satellite-based crop monitoring, certification costs, and other agricultural support services. Premiums for crop insurance, accident insurance, health insurance, and asset insurance are also included in the drawing limit.
If a farmer changes the cropping pattern in a later season, the drawing limit will be recalculated based on the new crops to be grown. If the Scale of Finance for a particular crop season has not yet been announced by the State Level Technical Committee (SLTC), banks may consider a notional increase of 10% over the previous season’s SoF while calculating the limit. However, if the SoF has been announced but not revised, the existing SoF will continue to apply. For crops not covered under the SoF approved by the SLTC or District Level Technical Committee (DLTC), loans will be provided outside the KCC framework, though efforts should be made to include such crops in future SoF notifications.
The KCC credit limit is rounded off to the nearest ₹1,000. At the time of sanction, the Maximum Permissible Limit (MPL) for short-term crop loans is calculated on a notional basis by increasing the previous season’s limit by 10% from the second crop season onwards. If the actual drawing limit exceeds the MPL during any season or year, the MPL will be reassessed during the review process.
Marginal farmers are also eligible for a flexible credit facility called Flexi KCC, with limits ranging from ₹10,000 to ₹50,000. This limit is decided by the bank based on the farmer’s crop requirements, storage needs, farm expenses, household consumption needs, and investment requirements for agriculture and allied activities, without linking it to the value of land owned. The composite KCC limit is generally fixed for six years, but it can be increased if there is a change in the cropping pattern or the Scale of Finance.
Collateral Security
Banks are required to waive collateral security and margin requirements for agricultural loans, including loans for allied agricultural activities, up to ₹2 lakh per borrower. However, if a borrower voluntarily offers gold or silver as collateral for an agriculture loan within this collateral-free limit, it will not be treated as a violation of the collateral-free lending guidelines. In such cases, banks must obtain and keep a written declaration from the borrower stating that the pledge was made voluntarily. It is important to note that RBI’s collateral-free lending guidelines apply only to secondary collateral and do not affect the primary security or assets financed through the loan.
For agricultural loans above ₹2 lakh, banks can decide the collateral security and margin requirements according to their internal credit policy and the RBI guidelines in force from time to time. In the case of Kisan Credit Card (KCC) loans secured through hypothecation of crops or stock and having tie-up arrangements for loan recovery, banks may waive collateral security for loan amounts up to ₹3 lakh.
Purpose and Tenure of Kisan Credit Card (KCC)
Under the Kisan Credit Card (KCC) Scheme, banks provide credit facilities to eligible farmers to meet their farming and related financial needs. The KCC is offered as a composite credit facility with a tenure of six years.
The credit can be used for short-term crop cultivation expenses, including the cost of seeds, fertilizers, pesticides, labour, and other farming requirements. It also covers short-term credit needs for allied agricultural activities such as animal husbandry, fisheries, aquaculture, sericulture, lac cultivation, beekeeping, and similar activities.
Under animal husbandry, loans can be taken for rearing dairy animals, poultry birds, and small animals such as cattle, buffaloes, camels, yaks, mithun, goats, sheep, pigs, rabbits, and others. For fisheries and aquaculture, the credit can be used for fish and shrimp farming, fish seed rearing, ornamental fish farming, pearl culture, crab culture, seaweed cultivation, aquaponics, bio-floc fish farming, brackish water culture, and other inland and marine fisheries activities.
The KCC facility also covers post-harvest and post-production expenses, household consumption needs of the farmer’s family, and expenses related to maintenance of agricultural assets. Farmers can use the credit for soil testing, weather advisory services, technological support services, and obtaining organic farming or good agricultural practices certifications. In addition, the credit can be used for payment of crop insurance, accident insurance, health insurance, and asset insurance premiums. Produce marketing loans and investment requirements for agriculture and allied activities are also covered under the scheme.
The total amount required for crop cultivation, allied activities, post-harvest expenses, household needs, maintenance of farm assets, insurance, and produce marketing forms the short-term credit limit under the KCC. The amount required for long-term investments in agriculture and allied activities forms the long-term credit limit.
The short-term credit limit fixed for the sixth year, along with the estimated long-term credit limit, is treated as the Composite Maximum Permissible Limit (CMPL). This CMPL becomes the overall KCC credit limit available to the farmer.
Click here to download RBI new Circular on KCC
