Banking Test 5

The Kisan Credit Card scheme, introduced by the Reserve Bank of India in 1998 on the recommendation of a working group chaired by V K Sharma, was designed as a flexible, revolving credit instrument that would provide farmers with timely, adequate, and simplified access to institutional credit from the formal banking system to meet their diverse and recurring financial needs across the crop production cycle, eliminating the need to repeatedly approach the bank for fresh loans for each agricultural season and replacing the cumbersome system of crop loans requiring extensive documentation and appraisal with a pre-approved credit limit valid for a defined period. The scheme has been progressively simplified and expanded over the years and is now implemented uniformly by all scheduled commercial banks including public sector banks and private sector banks, all regional rural banks, and eligible cooperative banks across the country, providing a common framework that ensures consistency of terms and conditions for borrowers regardless of which banking institution they approach for a Kisan Credit Card. All eligible farmers including owner cultivators, tenant farmers cultivating land under oral leases, share croppers, and self-help groups or joint liability groups of farmers engaged in agricultural operations can apply for a Kisan Credit Card at any branch of a participating bank by furnishing proof of identity, proof of land ownership or cultivation rights, and such other documentation as the bank may require for credit appraisal and risk assessment purposes. The credit limit sanctioned under a Kisan Credit Card account is calculated based on the scale of finance fixed by the District Level Technical Committee for the crops proposed to be cultivated by the farmer in the current year, the estimated costs of post-harvest expenses, the maintenance and repair requirements of farm equipment and machinery, and the insurance premium payable for crop insurance schemes applicable to the farmer's holding, with an additional component for the consumption requirements of the farming household and a working capital provision for allied agricultural activities such as animal husbandry and fisheries if the farmer is engaged in those activities. Interest subvention is available under the Interest Subvention Scheme for short-term agricultural credit extended under the Kisan Credit Card to meet crop cultivation expenses, with the effective rate of interest payable by prompt-paying farmers fixed at a low concessional rate, making formal agricultural credit competitive with the rates charged by informal moneylenders and reducing the dependence of farming households on expensive informal credit sources. The revolving credit facility of the Kisan Credit Card allows the farmer to draw funds from the account as needed for agricultural operations during the year and to repay from the proceeds of crop sales or other income, with interest charged only on the amounts actually outstanding during each period, matching the credit instrument's repayment structure closely to the irregular and seasonal cash flow pattern of agricultural income.