When we assess the contributions of NDA government under Atal Behari Vajpayee'sleadership, often we are led to rank its Super Highway Projects or its aggressive Nuclear Policy or the Kargil War victory or its Foreign Policy initiatives as the foremost. But in my assessment, the greatest contribution of NDA government to India was the one aimed at Indian farmers ? the Kisan Credit Card (KCC) scheme. KCC Scheme was announced by the Government of India in 1998-99. It is basically a revolving cash credit facility given to farming householders, for production, investment or even contingency purpose. The credit limit is determined upon the size of land holdings, cropping pattern and the scale of finance. KCC permits for unlimited number of withdrawals and repayments within the credit limit, and each repayable within a cycle of 12 months. This gives a lot of flexibility and freedom to the farmers, who can withdraw and repay money at any point of time, without having to go through the whole complex procedure every time.
KCC is the most effective instrument for Financial Inclusion. Usually a savings account is also simultaneously opened by banks while issuing a KCC, thereby giving opportunity for savings, credit, and repayment. Very interestingly the KCC scheme also has an inbuilt component of micro-insurance at a subsidised premium of merely Rs.5. This gives coverage of Rs. 50,000 for death and disability. Revolving cash credit facility at a very affordable rate of seven per cent can also help him in swapping of loans from non-formal lenders thereby redeeming the farmer from the vicious cycle of costly debt-trap.
KCC addresses the problem of not merely agricultural credit; it rather enhances the creditability of the agriculturist. This can enable him to plan for investments with proper foresight and confidence. It is noteworthy that KCC extension falls within the category of ?Crop Loan? and he is still entitled for the ?Term Loan? if required in addition. This makes KCC all the more attractive for the farmer. The possible contingency expenses are also factorised while determining the credit limit, thereby giving him sufficient liquidity to meet such expenses. Credit per-se converts a farmer into a debtor, while creditability transforms him into a confident investor.
All over the country, more than 72 million KCCs have been issued till date. More than 75 per cent of them are in Andhra Pradesh, Madhya Pradesh, Orissa, Rajasthan, Tamil Nadu and Uttar Pradesh. If CMIE (March, 2006) reports are to be believed, we still have about 44 million farming households yet to be covered. NABARD has asked all banks to intensively issue KCC to cover all farming households, including oral lessees, tenant farmers, and share-croppers. Through a campaign mode for Financial Inclusion, we can easily cover the remaining households by another three to four years, say latest by 2012. Nothing could be more beneficial for Indian agriculture.
Though RBI has instructed the banks to issue all crop loans hereafter through KCCs, not much tangible results have been achieved. A lot of procedural simplification, clarity and uniformity need to be ensured to expand the reach of KCC. The present achievement has been largely due to the contributions of cooperative banks and RRBs. The commercial banks are still wanting in taking the scheme to the farmers. My experience shows that there is still lack of clarity and uniformity in the procedures for issuing of KCC, across different banks, and even across different branches of same banks within the same district. The kind of title clearance documents required, NoC from all other banks, number of joint applicants in case of joint ownership of land, signing of agreement in person, processing charges, proof of crop selection and applicability of service area varies from bank to bank and district to district. While the norm for NoC exemption for loans upto Rs. 50,000 has been made clear by the RBI recently, still the banks insist on NoC for KCC having credit-limit less than Rs. 50,000. While documentary requirements for normal crop loans are much simpler, there are banks which insist on annual land utilisation records and record of right entries of as much as last 50 years for KCC processing.
It is very pertinent to note here that though Commercial Banks and RRBs are issuing crop loans at seven per cent interest rate, many District Cooperative Banks have not yet complied. Many are charging as high as 13 per cent still. For those farmers who are members of Primary Agriculture Credit Societies affiliated to these banks, KCC charges are inordinately high as much as twice the rate for the rest. These discrepancies will have to be immediately redressed to.
Government should focus on application of technology to develop an IT-enabled KCC which can be in the form of a smart card with a Permanent Identification Number for each farming-household. This KCC Smart Card could contain the digitized history of agricultural credit linkages of the farm. Government should also think of expanding the financial services linked to KCC. This could also function as an Entitlement Card not only for crop loans, but also term-loans for capital investment costs towards land improvement, rain water harvesting, organic farming, drip irrigation, rural storage facilities and horticulture development. This will go a long way in simplification of procedures and transaction costs for bankers as well as help farmers in improving the productivity and income. To begin with, such experiments should be piloted in some select districts, and if successful, should be replicated and scale up.
I hope that the NDA would realise the hidden economic and political potential behind this scheme and highlight it as a flagship program for its forthcoming election campaigns. Nothing touches the life of a common-man farmer in India as much as a KCC does, by empowering him through enhancing his creditability.
(The writer is a social thinker and activist and can be contacted at insightsram@gmail.com)
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