AGRICULTURE FINANCE

Short Term -: These loans are taken to meet needs like payment of labour wages, buying of
fertilizers, pesticides, seeds, fodder (for livestock), etc. These loans are for a period of up to 15
months. Farmers usually turn to Cooperative societies and money lenders to meet their short-
term Agricultural Finance needs.

Medium-Term -: Purchase of Agricultural Equipment, Cattle, building/repairing of wells on

farmland, etc comes under medium-term needs. The loans taken to meet these demands are
usually for a period ranging from 15 months to 5 years. Agencies like commercial banks,
cooperative societies, money lenders, etc provide the loans to meet the medium-term needs of
agricultural Finance.

Long Term -: When Farmers want to purchase new land, Agri equipment like tractors, etc.
long-term loans are required. These are for a period of more than 5 years. These loans are
provided by Commercial Banks, Primary Cooperative Agricultural and Rural Development
Banks (PCARDBS), etc.
Kisan Credit Card (KCC)
• The Kisan Credit Card (KCC) scheme was introduced in 1998 for
issue of Kisan Credit Cards to farmers on the basis of their
holdings for uniform adoption by the banks so that farmers may
use them to readily purchase agriculture inputs such as seeds,
fertilizers, pesticides etc. and draw cash for their production
needs. The scheme was further extended for the investment
credit requirement of farmers viz. allied and non-farm activities in
the year 2004.

• No collateral will be required for loans amounting up to Rs.1.60

lakh.
Features of Kisan Credit Cards

• Credit to meet the financial requirements of agricultural and other allied activities.
• Ancillary credit for crop production and other contingencies.
• Investment credit for agricultural requirements such as dairy animals, pump sets etc.
• Produce marketing loans.
• Post-harvest expenses.
• Insurance coverage for Kisan Credit Card holders, including asset insurance and personal accident insurance
scheme (PAIS).
• All farmers who are eligible for the Kisan Credit Card will be issued a debit card in addition to the Kisan
Credit Card.
• The facility of revolving credit is available for any amount of withdrawals and repayments made within the
credit limit.
• Based on the annual review, banks will determine the validity of the existing credit card.
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• Credit limits can be increased at the issuing bank’s discretion 7 to accommodate for changes in cropping
pattern, increase in operating costs, etc. as an incentive for good record on credit card usage.
• Conversion/rescheduling of loans also permissible in case of damage to crops due to natural calamities.
• According to the RBI, the fixing of Kisan Credit Card interest rates as well as credit limits can be set by the
respective issuing bank. The average interest rate applicable ranges from 9-14% p.a.
• In addition, there are certain subsidies and schemes that the government offers farmers with regard to the
interest rate. These would depend on the repayment history and general credit history of the cardholder.
 Eligible for a Kisan Credit Card Loan Scheme
• Are an individual farmer who is an owner-cultivator.
• Belong to a group and are joint borrowers. The group has to be owner-cultivators.
• Are a self-help group (SHG) or joint liability group (JLG) of sharecroppers, farmers,
tenant farmers, etc.
• Fisheries and Aquaculture
• Poultry/ Dairy
The credit limit under the Kisan Credit Card may be fixed as under:
All farmers other than marginal farmers
• The short term limit to be arrived for the first year (For cultivating single crop in a year):
Scale of finance for the crop (as decided by District Level Technical Committee) x Extent of
area cultivated + 10 per cent of limit towards post-harvest/household/ consumption
requirements + 20 per cent of limit towards repairs and maintenance expenses of farm assets
+ crop insurance and/or accident insurance including PAIS, health insurance & asset
insurance.
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• Limit for second & subsequent year
First year limit for crop cultivation purpose arrived at as above plus 10 percent of the limit
towards cost escalation / increase in scale of finance for every successive year (2nd, 3rd, 4th
and 5th year) and estimated term loan component for the tenure of Kisan Credit Card, i.e.,
five years.

• For cultivating more than one crop in a year

The limit is to be fixed as above depending upon the crops cultivated as per proposed cropping
pattern for the first year plus an additional 10 per cent of the limit towards cost escalation /
increase in scale of finance for every successive year (2nd, 3rd, 4th and 5th year). It is assumed
that the farmer adopts the same cropping pattern for the succeeding four years. In case the
cropping pattern adopted by the farmer is changed in the subsequent year, the limit may be
reworked.
For Marginal Farmers
A flexible limit of ₹ 10,000 to ₹ 50,000 may be provided (as
Flexi KCC) based on the land holding and crops grown

Marginal Farmer' is a farmer who cultivates 13

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up to 1
hectare of agricultural land (as an owner, renter, or
sharecropper) (2.5 acres). A farmer farming agricultural land
of more than 1 hectare and up to 2 hectares (as owner,
renter, or sharecropper) is referred to as a “small farmer” (5
acres).
Term loan for investment
The term loan for investment is to be made towards land development, minor
irrigation, purchase of farm equipment and allied agricultural activities. The banks
may fix the quantum of credit for term and working capital limit for agricultural and
allied activities, etc., based on the unit cost of the asset/s
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proposed to be acquired
by the farmer, the allied activities already being undertaken
8 on the farm, the
bank's judgment on repayment capacity vis-a-vis total loan burden devolving on
the farmer, including existing loan obligations.

The long term loan limit should be based on the proposed investment(s) during
the five-year period and the bank's perception on the repaying capacity of the
farmer.
 Insurance under Kisan Credit Card Scheme
• The Kisan Credit Card provides for personal accident insurance which
farmers can opt for. Farmers will receive coverage of up to Rs.50,000 in
the event of death and Rs.25,000 in the event of an accident resulting in
disability.
• The premiums payable would be decided by the bank in conjunction with
the insurance provider.
• This coverage is optional and farmers who choose to opt for it should
meet the eligibility criteria as ascertained by the bank and insurance
provider.
 Pradhan Mantri Fasal Bima Yojana
Launched in 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) is a large-scale crop subsidy insurance
scheme that was aimed to safeguard farmers. This flagship scheme was designed in line with the One
Nation–One Scheme and replaces three older initiatives—Modified National Agricultural Insurance Scheme
(MNAIS), Weather-based Crop Insurance Scheme and the National Agricultural Insurance Scheme (NAIS)—
by incorporating their best features and removing inherent shortcomings to improve insurance services
available to farmers. This scheme is being administered by the Department of Agriculture, Cooperation and
Farmers’ Welfare under the Ministry of Agriculture, along with empanelled general insurance companies.

PREMIUMS UNDER THE PMFBY SCHEME

To avail insurance benefits under this scheme, farmers are required to pay a nominal share of actuarial
premiums—Kharif crops (2%), Rabi crops (1.5%), Commercial crops (5%) and Horticultural crops (5%).
However, 95-98.5% actuarial premium is fulfilled by the state and central governments and shared on a 1:1
ratio. For example, if a farmer has a sum of Rs. 35,000 and one hectare of land insured, the premium
charged by insurance companies is Rs. 4,000. In this scenario, if the farmer grows Kharif crops on the
insured land, then he is required to only pay 2% of the premium, i.e., Rs. 800 while the remaining amount of
Rs. 1,600 each will be paid by state and central governments.

This scheme was implemented by 18 insurance companies that became empanelled partners
 Modified Interest Subvention Scheme for Short Term Loans for Agriculture and Allied Activities
availed through Kisan Credit Card (KCC) during the financial years 2022-23 and 2023-24

In order to provide short term crop loans and short term loans for allied activities including animal husbandry,
dairy, fisheries, bee keeping etc. upto an overall limit of ₹3 lakh to farmers through KCC at concessional
interest rate during the years 2022-23 and 2023-24, it has been decided to provide interest subvention to
lending institutions viz. Public Sector Banks (PSBs) and Private Sector Banks (in respect of loans given by
their rural and semi-urban branches only), Small Finance Banks (SFBs) and computerized Primary
Agriculture Cooperative Societies (PACS) which have been ceded with Scheduled Commercial Banks
(SCBs), on use of their own resources.

This interest subvention will be calculated on the loan amount from the date of disbursement/drawal up to the
date of actual repayment of the loan by the farmer or up to the due date of the loan fixed by the banks,
whichever is earlier, subject to a maximum period of one year. The applicable lending rate to farmers and the
rate of interest subvention for the financial years 2022-23 and 2023-24 will be as follows:
• An additional interest subvention of 3% per annum will be provided to such of those farmers
repaying in time, i.e., from the date of disbursement of the loan/s upto the actual date of
repayment or upto the due date fixed by the banks for repayment of such loan/s, whichever is
earlier, subject to a maximum period of one year from the date of disbursement.

• This also implies that the farmers repaying promptly as above would get short term crop loans
and/or short term loans for allied activities including animal husbandry, dairy, fisheries, bee
keeping etc. @ 4% per annum during the financial years 2022-23 and 2023-24. This benefit
would not accrue to those farmers who repay their agri loans after one year of availing such
loans.

• Interest subvention and prompt repayment incentive benefits on short term crop loans and short
term loans for allied activities will be available on an overall limit of ₹3 lakh per annum subject to
a maximum sub-limit of ₹2 lakh per farmer in respect of those farmers involved only in activities
related to animal husbandry, dairy, fisheries, bee keeping etc.