a MAIN : ADV - 29/2012-13 DT. 14-05-2012 SUB : Rural Lending - 04 CO:RURAL BANKING DEPARTMENT FILE M-2 S-201 Revised Kisan Credit Card (KCC) Scheme Our Bank issued Master circular on Indian Bank Kisan Credit Card Scheme way back in the year 2003. (Ref: ADV.160/2002-03 dated 31.03.2003). Further, we have communicated the Kisan Credit Card Modification of guidelines vide circular ADV.136/2003-04 dated 23.02.2004. During November 2011, the Department of Financial Services, Ministry of Finance, Government of India constituted a Working Group under the Chairmanship of Shri T.M.Bhasin, our Chairman and Managing Director, comprising members from Reserve Bank of India, NABARD and National Payments Corporation of India (NPCI) to review the existing KCC scheme and suggest changes to make it a Smart Card cum Debit Card. The recommendations of the Working Group have been accepted by the Government of India. Based on that, NABARD vide circular Ref No. 71/PCD -04 /2011-12 dated 30.03.2012 and Reserve Bank of India vide circular Ref No RPCD.FSD.BC.No.77/05.05.09/2011-12 dated 11.05.2012 have communicated the revised Kisan Credit Card (KCC) Scheme for implementation by all banks. Our Board in the meeting held on 11.05.2012, adopted the revised KCC scheme and the guidelines for implementation by our branches. The salient features of the guidelines include the following: Assessment of crop loan component based on the scale of finance for the crop plus insurance premium x extent of area cultivated + 10% of the limit towards post-harvest / household/consumption requirements + 20% of limit towards maintenance expenses of farm assets. Flexi KCC with simple assessment prescribed for Marginal Farmers. Validity of KCC for 5 years. For crop loans, no separate margin need to be insisted as the margin is in-built in scale of finance. No withdrawal in the account to remain outstanding for more than 12 months; no need to bring the debit balance in the account to zero at any point of time.
Interest subvention /incentive for prompt repayment to be available as per the Government of India and / or State Government norms. No processing fee up to a limit of Rs. 3.00 lakh One time documentation at the time of first availment and thereafter simple declaration (about crops raised/ proposed) by farmer. KCC cum SB account to be provided to farmers instead of having two separate accounts. The credit balance in KCC cum SB accounts is to be allowed to fetch interest at savings bank rate. Disbursement to be effected through various delivery channels, including ICT driven channels like ATM/ PoS/ Mobile handsets. Operational guidelines of the revised Kisan Credit Card (KCC) scheme including illustrations on assessment of KCC limit are given in annexure I. Besides, additional guidelines on documentation and product codes are given in annexure II for guidance of branches. Action points for various functionaries to implement the scheme are given in annexure III. All the branches are advised to ensure 100% coverage of all eligible farmers in their operational area under the revised KCC Scheme during the ensuing Kharif season itself. Zonal Managers should personally monitor to ensure smooth and time bound implementation of the revised scheme. All staff members should be enlightened about the revised scheme with a view to popularize the same among the farming community and participate in the process of transformation of rural credit delivery mechanism. G N HEGDE GENERAL MANAGER (TMD/RBD) 2
Annexure I Kisan Credit Card (KCC) scheme - Revised operational guidelines 1. Purpose: a. To meet the short term credit requirements for cultivation of crops b. Post harvest expenses c. Produce Marketing loan d. Consumption requirements of farmer households e. Working capital for maintenance of farm assets and activities allied to agriculture, like dairy animals, inland fisheries etc f. Investment credit requirements for agriculture and allied activity like pumpsets, sprayers, dairy animals etc Note: The aggregate of components a. to e. above will form the short term credit limit portion and the aggregate of components under f will form the long term credit limit portion. 2. Eligibility: a. All Farmers Individuals / Joint borrowers who are owner cultivators b. Tenant Farmers, Oral Lessees & Share Croppers c. Self Help Groups or Joint Liability Groups of Farmers including tenant farmers, share croppers etc 3. Fixation of credit limit / Loan amount: The credit limit under the Kisan Credit Card may be fixed as under: 3.1. All farmers other than marginal farmers: a. For farmers raising single crop in a year Short term limit: Scale of finance for the crop (as decided by District Level Technical Committee) x Extent of area cultivated + 10% of limit towards post-harvest / household / consumption requirements + 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance, PAIS and asset insurance. 3.1.a.1. Term loans for investments towards land development, minor Irrigation, purchase for farm equipments and allied agricultural activities: The quantum of credit for term and working capital limit for agricultural and allied activities etc., is to be arrived at based on the unit cost of the asset/s proposed to be acquired by the farmer, the allied activities already being undertaken on the farm, repayment capacity vis-a-vis total loan burden devolving on the farmer, including existing loan obligations. 3
3.1.a.2. The Kisan Credit Card limit is to be arrived as under: First year limit for crop cultivation purpose arrived at as above plus 10% of the limit towards cost escalation / increase in scale of finance for every successive year ( 2 nd, 3 rd, 4 th and 5 th year) and estimated Term loan component for the tenure of Kisan Credit Card i.e. five years. b. For farmers raising 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 and an additional 10% of the Limit towards cost escalation / increase in scale of finance for every successive year (2 nd, 3 rd, 4 th and 5 th year). 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. 3.1.b.1. The long term loan limit based on the proposed investments during the five year period is to be arrived at as per para 3.1.a.2. 3.1.b.2. Maximum Permissible Limit: Short term loan limit arrived for the 5 th year plus the estimated Long Term loan requirement for five years will be the Maximum Permissible Limit (MPL) and treated as the Kisan Credit Card Limit. 3.1.b.3. Fixation of Sub-limits for other than Marginal farmers: (i) (ii) Short term loans and Term loans are governed by different interest rates. Besides, at present, short term crop loans are covered under Interest Subvention Scheme/ Prompt Repayment Incentive scheme. Further, repayment schedule and norms are different for Short term and Term loans. Hence, in order to have operational and accounting convenience, the card limit is to be bifurcated into separate sub limits for Short term cash credit limit cum Savings account and Term loans. Drawing limit for short term cash credit should be fixed based on the cropping pattern. The amounts for crop production, repairs and maintenance of farm assets and consumption may be allowed to be drawn as per the convenience of the farmer. In case the revision of scale of finance for any year by the district level committee exceeds the notional hike of 10% contemplated while fixing the five year limit, a revised drawable limit may be fixed and the farmer be advised about the same. In case such revisions require the card limit itself to be enhanced (4 th or 5 th year), the same may be done and the farmer be so advised. For term loans, installments may be allowed to be withdrawn based on the nature of investment and repayment schedule drawn as per the economic life of the proposed investments. It is to be ensured that at any point of time the total liability should be within the drawing limit of the concerned year. 3.2 For Marginal Farmers: 4
A flexible limit of Rs.10,000 to Rs.50,000 be provided (as Flexi KCC) based on the land holding and crops grown including post harvest warehouse storage related credit needs and other farm expenses, consumption needs etc. plus small term loan investments like purchase of farm equipments, establishing mini dairy/backyard poultry as per assessment of Branch Manager without relating it to the value of land. The composite KCC limit is to be fixed for a period of five years on this basis. 3.3 Illustrations for arriving at Card Limit are annexed. 4. Disbursement : 4.1. The short term component of the KCC limit is in the nature of revolving cash credit facility. There is no restriction in number of debits and credits. However, each installment of the drawable limit drawn in a particular year will have to be repaid within 12 months. The drawing limit for the current season/year could be allowed to be drawn using any of the following delivery channels. a. Operations through branch b. Operations using Cheque facility c. Withdrawal through ATM / Debit cards d. Operations through Business Correspondents and ultra thin branches. e. Operations through PoS available in Sugar Mills/ Contract farming companies, etc., especially for tie-up advances f. Operations through PoS available with input dealers g. Mobile based transfer transactions at agricultural input dealers and mandies. Note: a, b and c are operational now. Subsequently other delivery channels are proposed to be operational in a phased manner. 4.2 The long term loan for investment purposes may be drawn as per installment fixed. As the CC limit and the term loan limit are two distinct components of the aggregate card limit bearing different rates of interest and repayment periods, until a composite card could be issued with appropriate software to separately account transactions in either sub limits, two separate electronic cards may be issued. 5. Validity: i. The Kisan Credit Card is valid for 5 years subject to an annual review. ii. The review may result in continuation of the facility, enhancement of the limit or cancellation of the limit / withdrawal of the facility, depending upon increase in cropping area / pattern and performance of the borrower. iii. When extension and/or re-schedulement of the period of repayment on account of natural calamities affecting the farmer is granted, the period for reckoning the status of operations as satisfactory or otherwise would get 5
extended together with the extended amount of limit. When the proposed extension is beyond one crop season, the aggregate of debits for which extension is granted is to be transferred to a separate term loan account with stipulation for repayment in installments. 6. Rate of Interest (ROI): 6.1. ROI linked to Base Rate. However, if Government supported interest subvention is provided for any component of the limit, the rate of interest is to be fixed accordingly. (Presently interest rate for short term crop loans/kcc sanctioned to farmers up to Rs 3.00 lakh is 7% as per extant interest subvention scheme of Government of India). 6.2 Long term loan limit under KCC is linked to base rate. 7. Margin: 7.1. For crop loans, no separate margin need be insisted as the Margin is inbuilt while fixing the Scales of Finance. For term loan component, it will be in conformity with the guidelines of RBI from time to time. 8. Security: 8.1. Security will be applicable as per RBI guidelines prescribed from time to time. 8.2. Security requirements are as under: Hypothecation of crops up to card limits of Rs 1.00 lakh as per RBI extant guidelines. With tie-up for recovery: Hypothecation of Crops up to card limit of Rs.3.00 lakh without insisting on collateral security. Collateral security by way of mortgage of immovable property is to be obtained for loan limits above Rs.1.00 lakh in case of non tie-up and above Rs.3.00 lakh in case of tie-up advances. 8.3. In States where banks have the facility of online creation of charge on the land records, the same shall be ensured. 9. Repayment period: 9.1 Each withdrawal under the short term sub-limit as estimated under (a) to (e) of para 1 above, be allowed to be liquidated in 12 months without the need to bring the debit balance in the account to zero at any point of time. No withdrawal in the account should remain outstanding for more than 12 months. 9.2 The term loan component will be repayable depending on the type of activity/ investment as per the existing guidelines applicable for investment credit. 10. Other features: 6
a. Interest Subvention/Incentive for prompt repayment is applicable as advised by Government of India. Our branches should make the farmers aware of this facility. b. The KCC holder should have the option to take benefit of Crop Insurance, Assets Insurance, Personal Accident Insurance Scheme (PAIS), and Health Insurance (wherever product is available and have premium paid through his/her KCC account). Necessary premium will have to be paid on the basis of agreed ratio between bank and farmer to the insurance companies from KCC accounts. Farmer beneficiaries should be made aware of the insurance cover available and their consent is to be obtained, at the application stage itself. Note: 100% crop insurance coverage of all crop loans sanctioned for notified crops in notified areas should be ensured by the branches. c. One time documentation at the time of first availment and thereafter simple declaration (about crops raised / proposed) by farmer from the second year onwards. d. No processing fee should be charged up to a card limit of Rs 3.00 lakh. e. Farmers to be provided with KCC Short Term sub-limit cum SB account so as to allow credit balance in KCC cum SB accounts to fetch interest at savings bank rate. A separate folio needs to be maintained for the long term sub-limit until both the sub-limits are integrated through an electronic card with suitable software. Illustration Assessment of KCC LIMIT 7
1. Small Farmer raising Multiple Crops in a year 1. Assumptions: 1. Land holding: 2 acres 2. Cropping Pattern : Paddy - 1 acre (Scale of finance plus crop insurance per acre : Rs.11000) Sugarcane - 1 acre (Scale of finance plus crop insurance per acre: Rs.22000) 3. Investment/Allied Activities : (i) Establishment of 1+1 Dairy Unit in 1 st Year( Unit Cost : Rs.20000 per animal) (ii) Replacement of Pump set in 3 rd year ( Unit Cost : Rs.30000) 2. Assessment of Card Limit (i) Crop loan Component Cost of cultivation of 1 acre of Paddy and 1acre of Sugarcane (11000+22000) : Rs.33000 Add: 10% towards post harvest/household expense/consumption : Rs. 3300 Add: 20% towards farm maintenance : Rs. 6600 Total Crop Loan limit for 1 st year : Rs.42900 Loan Limit for 2 nd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 42900 i.e 4300) : Rs. 4300 :Rs.47200 Loan Limit for 3 rd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 47200 i.e 4700) : Rs. 4700 : Rs.51900 Loan Limit for 4 th year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 51900 i.e 5200) : Rs. 5200 :Rs.57100 Loan Limit for 5 th year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 57100 i.e 5700) : Rs. 5700 8
: Rs.62800 Say Rs.63000.(A) (ii) Term loan component: 1 st Year :Cost of 1+1 Dairy Unit : Rs. 40000 3 rd Year : Replacement of Pumpset : : Rs. 30000 Total term loan amount : Rs. 70000.(B) Maximum Permissible Limit /Kisan Credit Card Limit (A) +(B) : Rs.133000/- Note: Drawing Limit will be reduced every year based on repayment schedule of the term loan(s) availed and withdrawals will be allowed up to the drawing limit. 9
2. Other Farmer raising Multiple Crops in a year 1. Assumptions: 2. Land Holding: 10 acres 3. Cropping Pattern: Paddy- 5 acres (Scale of finance plus crop insurance per acre Rs.11000) Followed by Groundnut - 5 acres (Scale of finance plus crop insurance per acre Rs.10000) Sugarcane - 5 acres (Scale of finance plus crop insurance per acre Rs.22000) 4. Investment/Allied Activities : (i) Establishment of 2+2 Dairy Unit in 1 st Year ( Unit cost : Rs.100000) (ii) Purchase of Tractor in 1 st Year( Unit Cost : Rs.600000) 2. Assessment of Card Limit (i) Crop loan Component Cost of cultivation of 5 acres of Paddy, 5 Acres of Groundnut and 5 acres of Sugarcane : Rs.215000 Add: 10% towards post harvest/household expense/consumption : Rs. 21500 Add: 20% towards farm maintenance : Rs. 43000 Total Crop Loan limit for 1 st year Loan Limit for 2 nd year : Rs279500 Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 279500 i.e 27950) : Rs.27950 :Rs.307450 Loan Limit for 3 rd year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 307450 i.e 30750) : Rs.30750 :Rs.338200 Loan Limit for 4 th year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 338200 i.e 33800) : Rs.33800 :Rs.372000 Loan Limit for 5 th year Add: 10% of the limit towards cost escalation/increase in scale of finance (10% of 372000 i.e 37200) : Rs.37200 :Rs.409200 Say Rs.409000 (A) 10
(ii) Term loan component: 1 st Year :Cost of 2+2 Dairy Unit : Rs. 100000 Purchase of Tractor : Rs.600000 Total term loan amount : Rs.700000.(B) Maximum Permissible Limit /Kisan Credit Card Limit (A) + (B) : Rs.1109000/- Note : Drawing Limit will be reduced every year based on repayment schedule of the term loan(s) availed and withdrawals will be allowed up to the drawing limit. 11
3. Marginal Farmer raising Single Crop in a year 1. Assumptions: 1. Land holding: 1 acre 2. Crops grown: Paddy ( Scale of finance plus crop insurance per acre : Rs.11000/-) 3. There is no change in Cropping Pattern for 5 years 4. Allied Activities to be financed One Non Descript Milch Animal ( Unit Cost Rs: 15000) 2. Assessment of Card Limit: (i) Crop loan Component (Cost of cultivation for 1 acre of Paddy) : Rs.11000 Add: 10% towards post harvest/household expense/consumption : Rs. 1100 Add: 20% towards farm maintenance : Rs. 2200 Total Crop Loan limit for 1 st year : Rs.14300 A1 (ii) Term Loan Component Cost of One Milch Animal : Rs.15000 B 1 st Year Composite KCC Limit : (A1) + (B) : Rs.29300 2 nd Year : Crop loan component: A1 plus 10% of crop loan limit (A1) towards cost escalation/ increase in scale of finance [14300+(10% of 14300= 1430)] : Rs.15730 A2 2 nd Year Composite KCC Limit : A2+B ( 15730+15000) : Rs.30730 3 rd Year : Crop loan component: A2 plus 10% of crop loan limit (A2) towards cost escalation/ increase in scale of finance [15730+(10% of 15730= 1570)] : Rs.17300..A3 3 rd Year Composite KCC Limit : A3+B ( 17300+15000) : Rs.32300 12
4 th Year : Crop loan component: A3 plus 10% of crop loan limit (A3) towards cost escalation/ increase in scale of finance [17300+(10% of 17300= 1730)] : Rs.19030..A4 4 th Year Composite KCC Limit : A4+B ( 19030+15000) : Rs.34030 5 th Year : Crop loan component: A4 plus 10% of crop loan limit (A4) towards cost escalation/ increase in scale of finance [19030+(10% of 19030= 1900)] : Rs.20930..A5 5 th Year Composite KCC Limit : A5+B ( 20930+15000) : Rs.35930 Say Rs.36000 Maximum Permissible Limit / Composite KCC Limit : Rs.36000 Note: Drawing Limit will be reduced every year based on repayment schedule of the term loan(s) availed and withdrawals will be allowed up to the drawing limit All the above costs estimated are illustrative in nature. The recommended scale of finance / unit costs may be taken into account while finalizing the credit limit. 13
Documentation: Annexure II Additional guidelines for documentation and product codes In accordance with the securities prescribed for the advances, appropriate documents from the following have to be taken. Agreement for hypothecation - Agricultural loans (Direct/Allied Activities) - D-68 Agreement of Guarantee - D-57 Equitable Mortgage - D-32/D-33/D-34/D-34A or Registered Mortgage - D-67 Disposal of proceeds letter - D-7 For renewal of KCC short term limit, application Form II (2) ( given in Annexure 4.8, Rural Banking Manual 2008) In case of tie-up arrangement Letter addressed by the borrower to sugar mill or procuring agency (F-118) Letter addressed by sugar mill or procuring agency to Bank (F- 119) For Short term and Term loan components of KCC limit, necessary documents / forms / requirement are to be obtained as mentioned in the Documentation manual (Ref Chapter 5 Page 5.79 to 5.85). Product Codes: KCC loans for crop production purposes sanctioned to farmers up to Rs.3.00 lakh will continue to be charged at 7% ROI as per extant Interest subvention scheme for short-term crop loans of the Govt. of India. Accounts eligible under Interest subvention scheme should be opened under KISAN CREDIT CARD 7% (5503 0005) product code only. Accounts with short term limit beyond Rs 3.00 lakh and accounts which are not eligible to be covered under Interest Subvention scheme, if any, are to be opened under any one of the following product codes depending upon the limit KCC (50000) BASE RATE (5903 0017) KCC (200000) BASE RATE (5903 0018) KCC (500000) BASE RATE (5903 0019) KCC ABOVE 500000- BASE RATE (5903 0020) 14
For Term Loan components of the KCC limit, accounts are to be opened under the relevant product codes as applicable to type of activities. Annexure III ACTION POINTS FOR BRANCHES Henceforth, all fresh loans including renewal of agricultural loans (short term and long term) have to be considered under the new KCC scheme only. During village visits / pre season campaigns by BM/RDO, the farmers requests for KCC are to be ascertained for fresh loans /renewal of KCC. All existing KCC accounts may be converted into new KCC scheme during the tenure of the limit at the option of the farmers. New farmers are to be asked to submit land revenue record, photographs and KYC documents. Branch Manager/RDO should process the proposal with due diligence. Branch to ensure that the farmers have the following limits: The short term cash credit limit cum savings account in the nature of revolving cash credit facility. There is no restriction on number of debits and credits up to the drawing limit at any point of time. Investment requirement of farmers in the nature of term loans. Upon sanction, branch shall inform farmers to execute loan documents. Upon execution of documents at branch, the branch should apply for Kisan ATM cum Debit card to CO: ATM Card Section immediately. The screen for submitting Kisan card requests is provided in the URL http://10.100.6.215/atmnet/kisan.asp On receipt of Kisan card, capturing of bio-metrics of the farmers is to be ensured and activated for all the KCC holders. While delivering card to the farmers, they should be educated / guided adequately to operate the accounts as per their need. Branch should disburse the loan immediately in cases where charge on land is not required to be created. Where charge is to be created on land, loan limit is to be disbursed after completion of charge creation. Proposed electronic Kisan Cards (ATM cum Debit cards) under RUPAY platform may be issued to KCC farmers in their existing accounts also (other than overdue accounts) facilitating them to operate the account at their convenience. Kisan card is specific to each KCC account. Hence, while renewing the existing accounts for a tenure of five years, care should be taken to ensure that same account number is maintained by obtaining appropriate documents. Card validity period is five years. 15
Where farmers have no access to any ATMs, cash withdrawals should be allowed at branches as allowed hitherto. Farmers who are issued ATM cum Debit Card should also be allowed to draw from the branch, if they so desire. However, they may be encouraged and educated to utilize the ATM facility wherever available. Branches should ensure regular follow up of advances for proper conduct of the accounts to maintain asset quality. Branches should issue Kisan Credit cards to all the eligible farmers in their command area during the ensuing Kharif season. FOR ZONAL OFFICES To conduct the meeting of Branch Managers and RDOs to sensitize them about the revised Kisan Credit Card scheme and its importance. To identify strategic locations for installing bio metric ATMs and provide necessary infrastructure to suit the current requirements i.e new delivery channels of disbursement of agricultural credit by biometric enabled ATM cum debit card. To ensure that necessary arrangements have been made (including deployment of officials/rdos to the needy branches) in rural and semi-urban branches for uninterrupted credit flow to meet the seasonal demand. To print and supply pamphlets/leaflets in local language on revised KCC scheme and ensure distribution of the same to farmers by branches. To fix weekly targets to branches to cover all the eligible households during the ensuing Kharif season itself and to monitor the issue of KCC ATM cum debit cards as per the identified list in each and every village. To review the progress on a daily basis and render proper guidance/support to branches wherever needed. To participate in pre season credit campaigns, monitor the branches for proper and effective conduct of the same To ensure distribution of Kisan ATM cum debit cards to all eligible farmers through wide publicity. ****************************************************************************************************** 16