What changed
RBI consolidated and updated the KCC Scheme into a single Directions document under Sections 21 and 35A of the Banking Regulation Act, 1949. The Directions standardize crop season definitions (12 months for short-duration, 18 months for long-duration) and introduce a composite credit facility tenure of six years. Marginal farmers are defined as those with up to 1 hectare, small farmers as 1-2 hectares. The Directions apply to all commercial banks except Small Finance Banks, Payment Banks, and Local Area Banks, effective January 1, 2027.
What it means for you
Banks must align their KCC product structures with the new standardized crop seasons and the six-year composite facility tenure by the effective date. The clear definitions of marginal and small farmers will impact loan limit calculations and priority sector reporting. Existing KCC loans sanctioned before January 1, 2027, remain under current guidelines until renewal or maturity, giving banks time to transition.
What you must do
- Review and update KCC loan policies to incorporate the standardized 12-month and 18-month crop season definitions.
- Ensure KCC product systems reflect the six-year composite facility tenure for new sanctions from January 1, 2027.
- Train credit staff on the revised definitions of marginal and small farmers for accurate loan limit assessment.
- Prepare a transition plan for existing KCC loans, which continue under old guidelines until maturity or renewal.
- Update internal circulars and disclosure documents to reference the new Directions (RBI/FIDD/2026-27/402).
Who it affects
All Commercial Banks (excluding SFBs, Payment Banks, Local Area Banks), KCC loan officers and credit policy teams, Priority sector lending compliance departments, Agricultural and rural banking divisions
When do the new KCC Directions take effect?
The Directions apply to loans sanctioned under the KCC Scheme from January 1, 2027. Loans sanctioned before that date continue under existing guidelines until maturity or next renewal.
Which banks are covered by these Directions?
All Commercial Banks as defined under the Banking Regulation Act, 1949, including corresponding new banks and State Bank of India, but excluding Small Finance Banks, Payment Banks, and Local Area Banks.
What is the new tenure for KCC composite facilities?
The Directions specify a composite facility tenure of six years for KCC loans covering short-term credit for crops and allied activities.