What changed
Previously, KCC only covered short-term crop loans; farmers had to approach banks separately for investment credit. Now, the revised scheme allows term loans for agriculture and allied activities (e.g., livestock, fisheries) and working capital to be provided through the same KCC. The passbook is split into three sections for short-term, working capital, and term credit records.
What it means for you
Banks can now offer a comprehensive credit package under KCC, simplifying farmer access and reducing their transaction costs. This expands banks' agricultural lending portfolio by bundling term loans with existing crop loans, potentially increasing credit uptake. However, banks must assess repayment capacity more holistically, considering total loan burden including existing obligations.
What you must do
- Update internal KCC product guidelines to include term loans for agriculture and allied activities as per NABARD's revised model scheme.
- Train branch staff on the new single-window approach, including passbook segmentation for short-term, working capital, and term credit.
- Revise credit assessment processes to evaluate whole-farm income and repayment capacity for combined limits.
- Report monthly progress on KCC term loan implementation to RBI in the prescribed format.
Who it affects
All Scheduled Commercial Banks, Regional Rural Banks (RRBs), State Co-operative Banks/DCCBs/PACS, Scheduled Primary Cooperative Banks, Farmers and agricultural borrowers
What new facilities are covered under the revised KCC scheme?
The revised KCC now covers term loans for agriculture and allied activities (e.g., livestock, fisheries) and working capital, in addition to existing short-term crop loans. A consumption credit component may also be included.
How should banks manage the different credit facilities under one KCC?
Banks must divide the passbook into three separate sections for short-term credit, working capital, and term credit. Transaction records for each facility must be kept distinct to ensure clarity.
What is the basis for fixing the credit limit under the revised scheme?
The limit is based on the unit cost of assets, existing allied activities, and the farmer's repayment capacity considering total loan burden. It includes initial investment and recurring expenditure, with a revolving cash credit for working capital.