Paper Title:

Kisan Credit Card A State Intervention for Financial Inclusion:

A Case Study of Khanikar Village, Dibrugarh
Submitted by:
!I"A#KA KAK$%I
Lecturer, Dr. Radha Krishnan School of Arts, Commerce Science
!mail: priyan"a.dib#$mail.com
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(arch /, 0123
%r$ani'ed by:
D'A!%(A#% $F 'C$#$(ICS
Dibrugarh *niversity
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(n the recent years, the Reser)e *an" has been a$$ressi)ely pursuin$ financial inclusion
on the belief and understandin$ that financial inclusion is a necessary pre+condition for inclusi)e
$ro,th. De)elopment e-perience o)er the last si-ty years from around the ,orld clearly
e)idences that ,hat the poor ,ant is not charitably $i)en, but opportunity to impro)e their
incomes and thereby their .uality of life. /inancial inclusion is a necessary condition for
pro)idin$ such an opportunity to the poor not only to raise their incomes but also to insulate their
families a$ainst income shoc"s and meet emer$encies such as loss of 0ob, illness or death in the
family. *oth the 1o)ernment and the Reser)e *an" ha)e ta"en se)eral initiati)es to further
financial inclusion.
A$riculture is surely the life line of a ma0ority of the people in the country includin$ in
the &orth !ast. A$riculture is one of the "ey priority sectors for lendin$ by ban"s2 under the
priority sector lendin$ sector, ban"s are re.uired to ensure that at least 345 of their ad)ances
$oes to a$riculture. !)en so, ,e are a,are that millions of small farmers, many of them farmin$
at subsistence le)els, do not $et access to credit for a )ariety of reasons. Simplified Kno, 6our
Customer $uidelines, 7no frill8 accounts, Kisan Credit Cards, 1eneral Credit Cards and o)er+
draft facilities ha)e all been desi$ned "eepin$ the rural borro,er in mind.
Thus, this paper ,ill attempt to discuss the )arious ad)anta$eous aspects of usin$ Kisan
Credit Card 9KCC:. The paper also see"s to study the socio+economic status of the farmers usin$
KCC in Khani"ar )illa$e. /or the purpose of the study, thirty beneficiaries ,ere sur)eyed and
their )ie,s and opinions considered. To,ards the end of the paper, su$$estions are also pro)ided
for the better implementation of the scheme amon$ the farmin$ community.
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252 Introduction
The sta$nation in a$ricultural producti)ity, increase in cost of production, distortions in
the mar"et and poor infrastructure ha)e made the li)elihood of farmin$ population more
difficult. A lar$e number of po)erty ; ridden farmin$ households especially mar$inal and small
farmers, tenant farmers, oral lessees, share croppers and a$ricultural labourers e"e out li)in$
from a mi- of subsistence acti)ities li"e animal husbandry especially of small ruminants, ,a$e
labour, horticulture, forestry, plantation, lo$$in$ etc.. The reasons of per)asi)e rural po)erty are
lo, $ro,th rate in a$riculture, lo, producti)ity, failed crops, unemployment, and inade.uate
command o)er resources due to lo, income le)el, lo, adoption of a$ricultural technolo$y, non+
access to credit and e)en ine.uitable access to credit. A$ricultural $ro,th is the panacea for rural
po)erty alle)iation.
Strate$ies are re.uired to enhance the present rate of $ro,th of a$riculture from 3.< per
cent to at least = per cent in order to achie)e the double di$it $ro,th rate of 1DP. !nhanced
$ro,th rate in a$riculture ,ill not only impro)e the income and employment le)els of farm
households but also reduce the le)el of po)erty, address the hun$er, malnutrition, promote rural
prosperity and miti$ate rural distress. (n order to achie)e the hi$her $ro,th rate in a$riculture the
1o)ernment promotes adoption of ne, a$ricultural technolo$y for hi$her producti)ity. The
adoption of ne, a$ricultural technolo$y re.uires intensi)e use of inputs and pac"a$e of
practices. This stimulates public and pri)ate in)estment in a$riculture and substantial increase in
the re.uirement of production and in)estment credit.
The institutional sources of credit meet >3 per cent of the credit re.uirements of the farm
sector. /armers hea)ily depend on non institutional sources of credit due to fre.uent needs,
inade.uate a)ailability of institutional credit, unnecessary delays, cumbersome procedure and
improper practices adopted by institutional lendin$ a$encies. Due to hi$h cost of credit from the
non+institutional sources the producti)e capacity of the borro,er farmer is deterioratin$. The
small borro,ers are also interested in ade.uate supply of credit rather than lo,er rates of
interest.
1i)en the enormity of the credit re.uirements on one hand and the )a$aries of the nature
on the other, financin$ a$riculture has been a $i$antic tas" for ban"s in (ndia. !nsurin$
timeliness and ade.uacy of credit to farmers ha)e posed the most serious challen$es to ban"s
en$a$ed in financin$ a$riculture. /inancial sector reforms, ushered in as a part of the
liberali'ation of the (ndian economy in the be$innin$ of nineties, has infused a spirit of
competiti)eness and enterprise amon$ the ban"s in their endea)or for ser)in$ their customers in
the best possible manner. &A*ARD has been playin$ a proacti)e and catalytic role in $uidin$
the ban"s to meet the emer$in$ challen$es. To,ards this end, se)eral inno)ati)e strate$ies ha)e
been e)ol)ed by &A*ARD. The instrument of Kishan Credit Card 9KCC: is one of the "ey
products de)eloped to impro)e the farmer?s accessibility to ban" credit, simplify credit deli)ery
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mechanism and pro)ide more fle-ibility in use of credit. @odel scheme of Kishan Credit Card
formulated by &A*ARD in 3AA4+AA is bein$ implemented in all the States and Bnion territories.
250 $b6ective of Kishan Credit Card sche7e
As a pioneerin$ credit deli)ery inno)ation, Kishan Credit Card Scheme aims at pro)idin$
ade.uate and timely credit support from the ban"in$ system to the farmers for their culti)ation
needs includin$ purchase of inputs in a fle-ible, hassle free and cost effecti)e manner.
25052 %arget -rou8s of KCC
The tar$et $roups of beneficiaries for KCCs are all cate$ories of farmers and also
)ulnerable $roups li"e defaulter+farmers, oral lessees, tenant farmers,share croppers and others
,ho ha)e been left outside the fold of KCC scheme for any reason and also ne, farmers. The
KCC scheme co)ers 9i: production credit 9ii: ,or"in$ capital re.uirements for allied acti)ities
9iii: ancillary credit re.uirements related to crop production 9i): contin$ent needs and 9):
accidental insurance of KCC borro,ers. Crop loans disbursed under KCC scheme for notified
crops are co)ered under &ational Crop (nsurance scheme. The purpose of the scheme is to
protect the interest of farmers a$ainst crop loss caused by natural calamities, pest attac"s etc.
Total AC.<= million credit cards ,ere issued by the a$encies at the end of /ebruary, DC3C.
253 Kishan Credit Card sche7e Salient features
a. !li$ible farmer ,ill be pro)ided a Kishan Credit Card and a Pass *oo" or a Card+
cum+Passboo".
b. Re)ol)in$ cash credit facility allo,in$ any number of dra,als and repayments
,ithin the limit.
c. !ntire production credit needs for full year plus ancillary acti)ities related to crop
production to be considered ,hile fi-in$ limit. (n due course, allied acti)ities and
non farm short term credit needs may also be co)ered.
d. Limit to be fi-ed on the basis of operational land holdin$, croppin$ pattern and
scales of finance.
e. Seasonal sub limits may be fi-ed at the discretion of ban"s.
f. Limit of )alid for E years sub0ect to annual re)ie,.
$. Con)ersion Freschedulement of loans also permissible in case of dama$e to crops
due to natural calamities.
h. As incenti)e for $ood performance, credit limits could be enhanced to ta"e cares
of increase in costs, chan$in$ in croppin$ pattern etc.
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i. Security, mar$in and rate of interest as per R*( norms.
0. %perations may be throu$h issuin$ branch F PACS or throu$h other desi$nated
branches at the discretion of ban".
". Githdra,als throu$h slips Fche.ues accompanies by card and passboo".
l. Personal Accident (nsurance of Rs. >C,CCC for death and permanent disability and
Rs. D>,CCCF+ for partial disability a)ailable to Kishan Credit Card holder at an
annual premia of Rs. 3>F+ per annum.
259 Advantages of KCC sche7e
a: /ull year?s credit re.uirement of the borro,er ta"en care of.
b: @inimum paper ,or" and simplification of documentation for ,ithdra,l of funds
from the ban".
c: Access to ade.uate and timely credit to farmer.
d: Assured a)ailability of credit for E years and a)oidance of uncertainly in)ol)ed in
accessin$ credit on a year to year basis.
e: Annual re)ie, of limit and pro)ision for enhancement sub0ect to satisfactory
operations.
f: /le-ibility in use of credit and sa)in$ in interest burden.
$: /le-ibility of dra,in$ cash from a branch other than the issuin$ branch at the
discretion of the ban".
h: A)ailability of the life co)erF disability insurance at )ery lo, premium in case the
farmers meets ,ith accident.
25: rogress of Kishan Credit Card sche7e
Accordin$ to the 1o)ernor of The Reser)e *an" of (ndia, the north+east poses a more
comple- challen$e for financial inclusion because of difficult terrain, lo,er population densities,
poor infrastructure, inade.uate communication facilities and la, and order disruptions.
Re$ardless, R*( ,ants to ensure that financial inclusion in &!R is at par ,ith that in the rest of
the country.
@any steps ha)e been ta"en in the &!R to increase credit flo, to a$riculture. Since
Assam is one of the states selected under the scheme of 7*rin$in$ 1reen Re)olution in !astern
(ndia8 implemented by the 1o)ernment of (ndia, the annual credit plan for a$riculture for Assam
has been re)ised up,ards. Ge ,ant ban"s to sanction KCCs to all eli$ible farmers in the State.
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(n Assam, bloc"+,ise ,ee"ly credit camps are bein$ or$anised to brin$ more and more farmers
under the KCC. The loan application format has been simplified and ,here)er land documents
are not a)ailable, the Hilla$e Panchayat?s certification is considered sufficient for $rant of a loan.
The e-ercise is bein$ replicated in other &!R states as ,ell.
052 Area of Study
The present study has been conducted on the )illa$ers of Khani"ar )illa$e, ,hich is at a
distance of I+4 Kilometers a,ay from Dibru$arh To,n.
050 $b6ectives of the Study
The ma0or ob0ecti)es of the present study are:
i: To e)aluate the implementation of KCC 9Kisan Credit Card: scheme in Khani"ar
)illa$e,
Dibru$arh.
ii: To assess the socio+economic de)elopment of the )illa$ers usin$ the KCC scheme.
053 (ethodology of the Study
(ethod: Considerin$ the nature of the data collected, descripti)e and analytical method has
been adopted in the present study.
o8ulation: The population of this study comprised of all the )illa$ers of Khani"ar )illa$e.
Sa78le: /or the purpose of the study the researchers ha)e selected EC beneficiaries of KCC
scheme as sample. Simple random samplin$ has been adopted for selectin$ the sample.
059 %ools *sed For Collection of Data
/or the purpose of this study, a ,ell or$ani'ed structured .uestionnaire schedule has been
used for the collection of the data from the sample respondents.
05: Collection of Data
(n order to collect the data, the researchers ha)e ta"en an inter)ie, schedule on the
)illa$ers of Khani"ar )illa$e, ,hich is situated at a distance of I+4 Km from Dibru$arh To,n.
Respondents ,ere inter)ie,ed carefully on a number of .uestions and supplementary .uestions
throu$h face to face interactions and their ans,ersFreplies ,ere noted do,n for the composition
of the literature of the paper.
352 Analysis of Data:
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(t has also been obser)ed that some farmers ha)e efficiently used this scheme for $ro,in$
crops and ha)e yielded better results. The study re)ealed that the role of credit under KCC
scheme in influencin$ fertili'er consumption and crop yield ,as .uite positi)e and si$nificant.
The a)era$e producti)ity of paddy $ro,n by KCC farmers is hi$her than non KCC farmers. The
main reasons of hi$her yield ,ere due to au$mented use of inputs li"e fertili'er, manure,
pesticide, labour, irri$ation etc by KCC farmers. The share of non+institutional sources of credit
has come do,n due to a)ailability of KCC facilities. The cost of borro,in$ of credit has sho,n a
mar"ed decrease amon$ KCC holders.
*ut it seems from the en.uiry from the fe, ban" branches no substantial pro$ress has
been made in issuin$ the KCC to these disad)anta$ed $roups. These )ulnerable $roups are also
not a,are of their eli$ibility to a)ail the facilities. &either the ban"s are interested to e-tend the
facilities to them in order to a)oid the ris" of reco)ery. %nly the positi)e relationship e-ists
bet,een borro,in$ under KCC scheme and land, household si'e and le)el of education.
The researchers ha)e found out that althou$h KCC scheme has been implemented to
some e-tent in Khani"ar )illa$e, yet 4C5 people ha)e not successfully implemented this scheme.
The basic reason that can be hi$hli$hted is the lac" of a,areness of the respondents. @ost of the
respondents ,ere not a,are of the benefits that can be reaped throu$h timely return. (t has been
obser)ed that some farmers apply for Kishan Credit Card and then use the finance for other
personal purposes li"e marryin$ their dau$hters off, buildin$ "utcha houses, buyin$ t,o
,heelers. Althou$h, settin$ of camps for spreadin$ a,areness amon$ the rural fol" has been
proposed by The Reser)e *an" of (ndia, yet this has not been reali'ed in this area.
Problems are fear factor of non+repayment of loan, lac" of a,areness of benefits of
institutional 9KCC: credit, bad e-perience ,ith institutional sources of credit especially ,ith
cooperati)e ban"s and inefficient and non+transparent operational system of credit deli)ery under
KCC scheme due to e-ploitation of bro"ers and apathetic attitude of the officials of the ban".
350 Suggestions
3. /inancial literacy relatin$ to repayment discipline should also be imparted by the a$encies to
the e-istin$ and prospecti)e borro,ers of KCC in order to arrest the problem of misutili'ationF
di)ersion of credit.
D. A$encies should ma"e pro)ision for fle-ibility of ,ithdra,als from a branch other than the
issuin$ branch in order to impro)e the operational efficiency.
E. AT@ facilities to be pro)ided to KCC holders in order to reduce the fre.uency of )isit to the
ban"+branch durin$ the specified ,or"in$ hours and for con)enient ,ithdra,als at any time.
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=. Ceaseless efforts to be made by the a$encies to brin$ the )ulnerable $roups li"e tenant
farmers, share croppers etc.
>. There is the ur$ent need to ma"e the credit deli)ery system under KCC scheme cost effecti)e,
transparent and farmers? friendly throu$h appropriate institutional reforms.
Conclusion
Jence, it can be concluded that "eepin$ in mind the financial needs of the a$ricultural
sector, financial institutions alon$ ,ith the 1o)ernment of (ndia has ta"en steps to boost the
credit to the a$ricultural sector. Jo,e)er, there are loopholes in the system ,hich needs to be
mended. The basic need of the hour is to ma"e these schemes more accessible and transparent.
@oreo)er, a,areness of these schemes in detail should be imparted to the tar$et sections so that
they can ma"e optimi'e use of these credit schemes.
4ibliogra8hy
3. 1o)ernment of (ndia 9DCCI+C4:, KKisan Credit Card 9KCC: Scheme?, !conomic Sur)ey,
pp 4A+AC.
D. 1o)ernment of (ndia 9DCCA+3C:, !conomic Sur)ey?, @inistry of /inance, pp A4+ AA, 34C.
E. &A*ARD 93AAA:, Kisan Credit Card, @umbai.
=. &A*ARD 9DCCI+C4:, KKisan Credit Card Scheme?, Annual report, @umbai, pp D<+DI.
>. &A*ARD 9DC3C:, KStudy on KCC?, Annual Report, @umbai, pp D4 + DA, I>.
<. Patil, *alasaheb Hi"he 9DCC4:, KA$ricultural (ndebtedness: Crises and Re)i)al?,
!conomic and Political Gee"ly, /ebruary CD, pp =I+>D.
I. Plannin$ Commission 9DCC4:, KDraft Report of the Committee on /inancial Sector
Reforms?, &e, Delhi.
4. Rao, C.J. Janumanth 9DCCA:, K(nclusi)e 1ro,th: Recent !-perience and Challen$es
Ahead?, !conomic and Political Gee"ly, @arch D4, Hol. LL(H &o. 3E, pp 3<+3A.
A. Sharma, R.D. 93AI4:, 7*an" credit and A$ricultural Transformation in *ac",ard Re$ion,
7The (ndian !conomic Mournal, Hol. D<, p. <>.
3C. Sin$h, 1. 93AI3:, KShortcomin$s in the !-istin$ Credit System,? /inancin$ A$riculture,
Hol. E pp D= ; DI.