SYLLABUS
GS-3: Issues related to Direct and Indirect Farm Subsidies; Inclusive Growth and issues arising from it.
Context: A third-party assessment by the Department of Agriculture & Farmers’ Welfare (DA&FW) has found that every ₹1 invested under the Kisan Credit Card–Modified Interest Subvention Scheme (KCC-MISS) generates ₹2.30 in net value addition to the agriculture and allied sector.
Key Findings of the Assessment
- High Economic Return: Every ₹1 invested under KCC-MISS generates ₹2.30 in net value addition to the agriculture and allied sector, demonstrating a strong economic multiplier.
- Reduced Interest Burden: Since inception till 2024-25, the scheme has reduced farmers’ interest burden through an estimated ₹1.87 lakh crore interest subsidy.
- Higher Cropping Intensity & Diversification: Access to concessional credit has enabled beneficiaries to cultivate larger areas, increase cropping intensity, adopt multi-season cultivation and diversify crop portfolios, supported by better irrigation and timely availability of credit.
- Improved Credit Discipline: Timely access to adequate working capital has facilitated prompt purchase of farm inputs, while beneficiaries receiving the Prompt Repayment Incentive (PRI) have demonstrated better repayment behaviour, enhancing banks’ confidence in agricultural lending.
- Boost to Allied Activities: The scheme has supported expansion of dairy, livestock and inland fisheries, promoted income diversification and strengthened Working Capital Requirements (WCR) for inland fisheries, particularly in the North-Eastern Region.
About Kisan Credit Card–Modified Interest Subvention Scheme (KCC-MISS)
- Objective: A Central Sector Scheme that provides timely and affordable short-term institutional credit to farmers through the Kisan Credit Card (KCC) for crop cultivation and eligible allied activities.
- Interest Benefit:
- Eligible short-term crop loans up to ₹3 lakh are available at 7% annual interest.
- For loans taken exclusively for Animal Husbandry or Fisheries, the interest benefit is available up to ₹2 lakh.
- Farmers making timely repayment receive an additional 3% Prompt Repayment Incentive (PRI), reducing the effective interest rate to 4%.
- Coverage: Provides concessional short-term credit for crop cultivation and eligible allied activities such as animal husbandry, dairy, fisheries and beekeeping through the Kisan Credit Card.
- Key Features:
- Interest subvention is provided by the Government to eligible lending institutions.
- Encourages prompt repayment through the Prompt Repayment Incentive (PRI).
- Covers eligible post-harvest loans against Negotiable Warehouse Receipts (NWRs) for Small and Marginal Farmers (SMFs), helping prevent distress sale of agricultural produce.
Significance of KCC-MISS
- Strengthens Institutional Agricultural Credit: Ensures timely availability of affordable formal credit, reducing farmers’ dependence on informal and high-interest sources of finance.
- Enhances Agricultural Productivity: Facilitates timely purchase of quality seeds, fertilisers, machinery and other farm inputs, resulting in improved productivity and higher farm incomes.
- Promotes Diversified Rural Livelihoods: Extends concessional credit to allied sectors such as dairy, fisheries, animal husbandry and beekeeping, supporting income diversification and resilience.
- Advances Financial Inclusion: Integrates farmers into the formal institutional finance ecosystem while facilitating access to banking services, crop insurance and other credit-linked financial products.
Challenges in Agricultural Credit Delivery
- Limited Access for Vulnerable Farmers: Tenant farmers, sharecroppers, oral lessees and landless cultivators often face difficulties in accessing institutional credit due to the absence of formal land ownership records.
- Regional Credit Imbalances: Agricultural credit remains unevenly distributed across States and regions, with weaker institutional penetration in several underserved areas.
- Inadequate Credit for Allied & Post-harvest Activities: Despite expanded coverage, credit flow to allied sectors, post-harvest management, storage and value addition remains below potential.
- Credit Utilisation & Repayment Risks: Climate shocks, crop failures, indebtedness and low financial literacy can adversely affect productive credit utilisation and timely loan repayment.
Way Forward
- Expand Inclusive Credit Access: Simplify KCC procedures and strengthen outreach for tenant farmers, women farmers and other underserved groups through flexible eligibility norms and digital onboarding.
- Strengthen Digital Agricultural Credit: Leverage Kisan Rin Portal, Aadhaar-enabled KCC, e-KYC and technology-based credit assessment to improve transparency, efficiency and timely credit delivery.
- Promote Integrated Agricultural Finance: Converge concessional credit with crop insurance, extension services, market access and value-chain infrastructure to maximise agricultural productivity and farmers’ income.
- Institutionalise Outcome-based Evaluation: Undertake periodic independent assessments to refine scheme design, improve targeting and ensure effective utilisation of public resources through evidence-based policy-making.