What Happened
- The Reserve Bank of India has released draft norms proposing a comprehensive revamp of the Kisan Credit Card (KCC) framework, extending the card validity period from the current tenure to six years.
- The draft proposes standardising crop season definitions across regions for uniform loan assessment and repayment timelines.
- Drawing limits will be linked to the officially approved Scale of Finance for each crop, ensuring sanctioned amounts reflect actual cultivation costs.
- Expenses on modern farm equipment and agri-tech tools may be formally included as eligible KCC expenditures.
- Under the Modified Interest Subvention Scheme (MISS), the loan limit has been raised from Rs 3 lakh to Rs 5 lakh, with an effective interest rate of 4% for timely repayers.
Static Topic Bridges
Kisan Credit Card (KCC) Scheme
The KCC scheme was introduced in August 1998 based on the recommendations of the R.V. Gupta Committee, with the model prepared by NABARD (National Bank for Agriculture and Rural Development). It provides farmers with a single-window credit delivery mechanism for cultivation expenses, post-harvest needs, and consumption requirements. The scheme was extended to cover allied activities and non-farm activities in 2004, and further revised in December 2020 to include animal husbandry and fisheries farmers.
- Launch: August 1998, based on R.V. Gupta Committee recommendations
- Implementing agency: NABARD prepared the model scheme
- Extended to allied and non-farm activities: 2004
- Revised KCC launched by PM: 18 December 2020
- Interest Subvention Scheme started: 2006-07
- As of December 2024: approximately 59 million farmers registered on the Kisan Rin Portal
- Over Rs 1.08 trillion in interest subvention claims processed digitally
Connection to this news: The proposed six-year tenure and linked credit limits represent the most significant structural changes to KCC since its 2020 revision, aiming to reduce procedural burden on farmers who currently must renew their cards more frequently.
Modified Interest Subvention Scheme (MISS)
The Interest Subvention Scheme (ISS), started in 2006-07, provides subsidised crop loans to farmers through KCC. Under its modified version (MISS), banks lend at 7% per annum for short-term crop loans. The government provides a 1.5% interest subvention to lending institutions, and farmers who repay on time receive an additional 3% prompt repayment incentive, bringing the effective rate down to 4% per annum.
- Base interest rate: 7% per annum
- Government subvention to institutions: 1.5%
- Prompt repayment incentive: additional 3%
- Effective rate for timely repayers: 4% per annum
- Loan limit under MISS: raised from Rs 3 lakh to Rs 5 lakh (Budget 2025-26)
- Animal husbandry/fisheries coverage: up to Rs 2 lakh
Connection to this news: The increase in the MISS loan limit from Rs 3 lakh to Rs 5 lakh, combined with the proposed KCC revamp linking limits to the Scale of Finance, ensures that farmers can access adequate credit at subsidised rates that reflect actual cultivation costs rather than outdated benchmarks.
Scale of Finance for Crop Loans
The Scale of Finance is the per-hectare cost of cultivation for specific crops in specific districts, determined by District Level Technical Committees (DLTCs) comprising lead bank officers, agriculture department officials, and NABARD representatives. It serves as the benchmark for banks to determine crop loan amounts. The Scale of Finance varies by crop, season (Kharif/Rabi/Summer), and geographic location, and is periodically revised to reflect input cost inflation.
- Determined by: District Level Technical Committees (DLTCs)
- Components: seed, fertiliser, pesticides, labour, irrigation, and other input costs
- Updated periodically to reflect cost escalation
- Used as the basis for crop loan assessment under KCC
- RBI mandates banks to use Scale of Finance for KCC limit computation
Connection to this news: By directly linking KCC drawing limits to the officially approved Scale of Finance for each crop season, the RBI aims to eliminate the disconnect between actual farming costs and loan amounts — a longstanding complaint of farmer organisations.
Key Facts & Data
- KCC scheme launched: August 1998 (R.V. Gupta Committee)
- Proposed KCC validity: 6 years (current system requires more frequent renewals)
- MISS effective interest rate: 4% for timely repayers (7% base minus 3% incentive)
- MISS loan limit: raised from Rs 3 lakh to Rs 5 lakh
- Registered farmers on Kisan Rin Portal: ~59 million (December 2024)
- Interest subvention claims processed: over Rs 1.08 trillion
- Animal husbandry/fisheries KCC coverage: up to Rs 2 lakh