What changed
RBI issued a clarification that KCC credit, being primarily for agricultural purposes, will be treated as direct finance to agriculture under priority sector lending, referencing earlier guidelines from August 22, 2007 that defined working capital and term loans for agriculture as direct finance.
What it means for you
For RRBs, this means KCC loans now count toward priority sector targets as direct agriculture finance, simplifying compliance. It encourages more KCC lending by ensuring these loans get the same treatment as other agricultural direct finance.
What you must do
- Classify all KCC loans as direct finance to agriculture under priority sector lending.
- Acknowledge receipt of this circular to the respective RBI Regional Office.
Who it affects
All Regional Rural Banks (RRBs), Priority sector lending compliance teams, Agricultural lending departments
Does this circular apply to all KCC loans issued by RRBs?
Yes, the circular clarifies that credit under KCC, being primarily for agricultural purposes, is treated as direct finance for agriculture under priority sector lending for all RRBs.
What was the previous treatment of KCC loans before this circular?
Previously, only working capital and term loans for agriculture were explicitly treated as direct finance. This circular extends that treatment to KCC credit.