Kisan Credit Card: Eligibility, Interest Rates & Application Process Explained

Kisan Credit Card, a farmer-exclusive credit card, is an easy way to get immediate credit for all kinds of farming needs. From purchasing a new tractor to getting health insurance, this credit card is here to empower Indian farmers financially at an affordable interest rate. 

Learn more about Kisan Credit Card eligibility, interest rates, and the application process. 

What is the Kisan Credit Card (KCC) Scheme?

Launched in 1998-99, the Kisan Credit Card, or KCC, is a government-sponsored financial scheme designed specifically for Indian farmers. It aims to provide farmers with timely and hassle-free credit at an affordable interest rate for their variety of farming and personal needs. 

It centralized the entire credit system for farmers. Instead of applying for a new loan every time farmers need credit to buy tractors and implements for allied activities and even for personal expenses, the KCC scheme provides them with a pre-approved credit limit. 

Objective and Purpose of the Kisan Credit Card Scheme

The primary goal of the KCC scheme is to provide "adequate and timely" credit to farmers under a single window. 

It aims to: 

• Meet all kinds of short-term credit needs of farmers around activities such as buying seeds, fertilizers, pesticides, and many more. 

• Cover the post-harvesting needs related to setting up a storage facility, protecting the harvested crops, and marketing the harvest. 

• Cover essential personal experiences such as education loans, loans, food expenses, etc. 

• Provide enough working capital required for the maintenance of the farm assets such as tractors, implements, cattle, poultry farms, and so on. 

• Grant hassle-free access to affordable loans or credit for long-term farm development, such as buying new machinery or setting up an irrigation system. 

Different Types of Kisan Credit Cards

There are different types of Kisan Credit Cards, based on the purpose or activity for which the credit is granted. 

The main credit categories under the KCC scheme are

• KCC for Crop Cultivation (Short-Term Loan): A standard KCC used to finance all immediate needs of farming. 

• KCC for Animal Husbandry: For farmers engaged in allied activities such as dairy, poultry, sheep, goat, or pig rearing. 

• KCC for Fisheries: For farmers engaged in both inland (aquaculture) and marine fisheries. 

How Kisan Credit Cards Are Delivered to Farmers

When your KCC loan is sanctioned, you are given a physical Kisan Credit Card. It is mainly a magnetic stripe card with a PIN and an ISO IIN. Based on the bank, you can either get a RuPay smart card cum debit card or an EMV card. 

You can use this card at ATMs, Micro-ATMs, PoS machines, and bank branches. 

Interest Rates Applicable Under the KCC Scheme

The KCC interest rate is mainly decided by the banks. However, the base interest rate for a loan amount up to ₹3 lakh is fixed at 7% per year.

The government provides a 2% upfront discount, and if the farmer pays the interest on time, they get an additional 3% discount. So, the effective KCC interest rate is just 4% per year.

For loans above ₹3 lakh, the standard interest rate of the bank will apply without any subvention. For timely repayments, simple interest is applied, whereas delayed repayments trigger compound interest. 

Key Benefits of the Kisan Credit Card for Farmers

Using a Kisan credit card leads to multiple benefits, such as:

• Instant access to the required credit at an affordable interest rate. For this scheme, the GOI offers a 2% subvention and an extra 3% incentive on timely repayment, resulting in a 4% reduction in the annual interest rate. 

• Repayment flexibility. Farmers need to pay the interest only on the amount withdrawn, not on the entire sanctioned amount. 

• Collateral-free loan for loans up to ₹1.6 lakh.

• Multiple insurance coverages, like free personal accident insurance coverage and crop damage coverage, according to the Pradhan Mantri Fasal Bima Yojana. 

Short-Term Loan Limit for First-Year Single Crop Cultivation

Under the KCC, farmers raising a single crop in a year can get the short-term loan as per the: 

(Scale of Finance for Crop × Area Cultivated) + 10% of limit (for household needs) + 20% of limit (for farm maintenance) + Crop Insurance Premium

For example, if the scale of the finance for the single crop (decided by the District committee) is INR ₹50,000 per acre, the household need is ₹1,50,000, the farm maintenance limit is ₹1,50,000, and the cultivation area is 3 acres, then the loan limit will be: 

= ₹50,000 × 3 + 10% of ₹150,000 + 20% of ₹150,000 + Crop Insurance Premium

= ₹1,50,000+₹15,000+₹30,000+Crop Insurance Premium

= ₹1,95,000+Crop Insurance Premium

Loan Limit for Second and Subsequent Years of Crop Cultivation

The KCC is valid for 5 years. For each new year (from the 2nd to the 5th), the bank will increase your limit to cover rising costs (inflation) as per the formula. 

Limit from the previous year + 10% of the previous year's limit.

Suppose the first-year crop cultivation limit is ₹1,95,000; then your second-year loan limit will be: 

₹1,95,000 + ₹19,500 (10% of ₹1,95,000) = ₹2,14,500

Loan Limit for Farmers Growing Multiple Crops in a Year

For farmers growing multiple crops in a year, the KCC loan limit is based on all the crops cultivated according to the proposed cropping patterns of the 1st year and an extra 10% limit. 

The limit towards cost escalation/increase in the scale of finance for every successive year (2nd, 3rd, 4th, and 5th years). It is assumed that the farmer adopts the same cropping pattern for the remaining four years also. In case the cropping pattern adopted by the farmer is changed in the subsequent year, the limit may be reworked. 

For example, the scale of finance for paddy crop is ₹50,000 per acre, and for wheat crop it is ₹30,000 per acre, and a farmer cultivates both the crops on a 5-acre land. 

Then the first-year loan limit will be 5 acres × ₹50,000 = ₹2,50,000+ 5 acres × ₹30,000 = ₹1,50,000+ 10% for household needs.

For each new year, your limit is automatically increased by 10% over the previous year's limit to cover rising costs.

• Year 2 Limit: Year 1 Limit + 10%

• Year 3 Limit: Year 2 Limit + 10%

This continues for all 5 years, as long as you continue growing the same crops.

Loan Limit for Investment in Multiple Crop Cultivation

This is known as the term loan, and the loan amount is decided according to the total cost of the asset(s) or project. 

Maximum Loan Amount Permitted Under the KCC Scheme

The limit depends on farmers’ requirements. Farmers can’t get a credit exceeding the amount of the short-term loan in the 5th year or the estimated long-term loan amount. 

Let's say a farmer needs ₹1,00,000 as the short-term limit for his crops in Yea. Hence, the 5th-year short-term loan amount will be ₹1,46,410 (with a 10% increase each year). He also needs ₹2,50,000 for a long-term loan to buy a new tractor.

So, his maximum loan amount will be 

= (5th Year Short-Term Limit) + (Long-Term Loan)

= ₹1,46,410 + ₹2,50,000

= ₹3,96,410

Eligibility Criteria for Applying for a Kisan Credit Card

Kisan Credit Card eligibility is simple. Any farmer is eligible for KKC if they are: 

• An individual farmer who owns and cultivates land.

• A tenant farmer, oral lessee, or sharecropper (who is cultivating the land).

• A Self-Help Group (SHG) or Joint Liability Group (JLG) of farmers.

• A farmer involved in animal husbandry (dairy, poultry) or fisheries.

The applicant must be between 18 and 75 years of age. If the farmer is over 60, a co-borrower (like a son or daughter) is usually required.

How to Apply Online for the Kisan Credit Card Scheme

Farmers can apply for a Kisan Credit Card online, and here is the process. 

• Visit the official website of the bank with which you wish to apply for the Kisan Credit Card scheme. All the leading Indian banks and financial bodies offer it. 

• Choose the Kisan Credit Card option. 

• Click on ‘Apply’ to go to the online KCC application form. 

• Fill in all the requested details accurately and submit the form. 

• You will get a KCC application number, and if your application is approved, the concerned bank will get back to you for further processing. 

How to Apply Offline for the Kisan Credit Card Scheme

To apply for the Kisan Credit Card offline, you need to follow the process. 

• Visit the nearest bank branch. All the commercial, regional, rural, and cooperative banks provide this card. 

• Ask for the offline KCC application form and fill in your details, such as name, full address, Aadhaar number, mobile number, land details, and types of crops you grow. 

• Submit the relevant documents, along with the office KCC application form, to the bank officer. 

Essential Documents Required for the Kisan Credit Card Application

In general, you need to present the following documents to apply for the Kisan Credit Card: 

• Copy of PAN, Aadhaar, or voter ID card 

• Address proof, including a voter ID, utility bill, or Aadhaar card

• A copy of patta, khatauni, or khasra to prove the land ownership. Tenant farmers need to present their copy of their lease agreement. 

• Two passport-size photos. 

• No dues certificate. 

• Proof of the crop grown 

• Security documents for any loan amount above INR 1.60 lakhs 

Conclusion

The Kisan Credit Card is a step towards a hassle-free credit ecosystem, built especially for the Indian farmers. By removing the general barriers such as long processing time, high interest rates, and different applications for different types of loans, the KCC scheme simplifies the loan process so much so that farmers get the financial need instantly. 

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