As farmers' protest against the government's agricultural laws near Delhi borders entered their 26th day, the latest State Bank of India (SBI) Ecowrap report has suggested slew of measures to resolve the standoff, including revisiting the current KCC scheme norms to increase farmers' monthly income.
According to the SBI Ecowrap, the monthly income of farmers will go up by a sharp 35 per cent by just revisiting the current Kisan Credit Card (KCC) norms. "As our model calculations, for a loan of Rs 1 lakh and with Rs 1.5 lakh Group Insurance cover (150% of loan), the monthly repayment will be Rs 533 only (or Rs 18 per day). We believe that the monthly income of farmer will go up to Rs 12,825 by the end of one year from the current level of Rs 9,500, simply by revisiting the current KCC norms," said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
SBI, in its Ecowrap report, suggested that the RBI in conjunction with government should introduce an operational flexibility in the structure of KCC and direct the banks to allocate a specific percentage of their loans to particularly agri start-ups to give a boost to agri supply chains in India. The cumulative capital flows into this sector up to 2019 stood at Rs 15,000 crore till 2019 and continued in pandemic also.
As per SBI report, a combination of revolving credit (say, share 40%) and term loan (60%) with flexibility of payment could be introduced in lieu of the current KCC scheme. The credits in the revolving limit, equal to at least the interest, can be debited during the year, while principal of the term loan to be repaid over 15 years (180 months) and interest (simple not compounded) should be serviced as and when debited, it said.
The KCC scheme was introduced in 1998 by the Reserve Bank of India (RBI) for issuance of credit to farmers on the basis of their holdings for uniform adoption by the banks. The Centre provides interest subvention of 2 per cent and prompt repayment incentive of 3 per cent to farmers, thus making the credit available at a subsidised rate of 4 per cent per annum.
In a bid to provide universal access to concessional institutional credit, Centre has pushed banks to provide KCC to all the 11.39 crore PM-KISAN beneficiaries. During February-April 2020, banks have received 75 lakh KCC applications, and 36 lakh KCCs have been issued. At the end of March, 2020, the KCC loans for scheduled commercial banks aggregated to about Rs 7.09 lakh crore to 6.7 crore active KCC card users, which constitute about 40% of the total agricultural loans given by them.
As per recent data released by the Ministry of Finance, 1.70 crore KCC holders with credit limit of about Rs 1.54 lakh crore have been covered under the special saturation drive for farmers under the Rs 20.97 lakh crore Atma Nirbhar Bharat Package. However, the KCC portfolio of banks has come under increasing stress over the years due to a variety of factors like crop losses, unremunerated prices, debt waivers and the rigidity of the KCC product.
As per the SBI report, small tweaks in KCC norms can extend a helping hand to the rural sector. The KCC outstanding data clearly indicates that if per card outstanding is more then there would be less farmer suicide, despite no farm loan waiver by governments, it said.