The Kisan Credit Card (KCC) is a pivotal financial initiative aimed at providing short-term loans to farmers, fishermen, dairy farmers, and those engaged in agriculture and allied activities. Launched in 1998, it facilitates easy access to credit for those who may otherwise struggle to secure loans from formal financial institutions. The KCC helps farmers meet their immediate financial needs, such as purchasing seeds, fertilizers, and equipment, thus supporting their agricultural operations.
In a significant move under the Union Budget 2025, Finance Minister Nirmala Sitharaman announced the increase in the interest subvention scheme limit for the Kisan Credit Card. The loan limit, which was previously capped at Rs 3 lakh, has now been enhanced to Rs 5 lakh. This expansion will provide farmers with greater financial flexibility, allowing them to access larger sums to meet their needs during critical crop cycles. This move is expected to empower approximately 77 million farmers, fishermen, and dairy farmers who are enrolled in the scheme, supporting their growth and reducing their dependency on informal lending sources.
Experts believe that this increase in the loan limit will play a key role in strengthening rural economies and ensuring long-term agricultural growth. Ritika Nayyar, Partner at Singhania & Co., noted that this step will increase access to institutional credit for farmers, promoting financial independence and reducing their reliance on high-interest informal lenders. Additionally, farmers will be better equipped to invest in modern farming inputs, equipment, and sustainable practices, leading to better agricultural productivity.
Ashwin Sapra, Partner at Cyril Amarchand Mangaldas, mentioned that the higher loan limits would address the immediate financial needs of farmers, especially during crucial crop cycles. As farmers often face financial constraints due to seasonal agricultural demands, this increased credit limit will help them overcome such challenges and stabilize their finances.
While the increase in the KCC loan limit is a welcome move, there are concerns regarding its smooth and timely disbursal, especially for small and marginal farmers. Sandeep Chilana, Managing Partner at Chilana & Chilana Law Offices, pointed out that the challenge would be to ensure that farmers receive their loans quickly without any bureaucratic hurdles. Furthermore, Chilana stressed the importance of implementing safeguards to prevent over-borrowing and to ensure that the increase in credit results in tangible benefits for the farmers rather than an additional debt burden.
Alay Razvi, Managing Partner at Accord Juris, added that ensuring small farmers can access the credit effectively is crucial for this initiative's success. By improving accessibility and awareness of the KCC scheme, the government can ensure that small farmers benefit fully from the loan enhancements, empowering them to improve their agricultural operations and overall financial health.
As of June 2023, there were over 74 million active KCC accounts, with a total outstanding credit of Rs 8.9 trillion. The KCC scheme offers a subsidized interest rate of 4% per annum, made possible by an interest subvention of 2% and a prompt repayment incentive of 3%. Farmers can avail of short-term loans for various agricultural activities, including crop production, livestock management, and non-farm activities such as fishing. Loans above Rs 1.60 lakh used to require a guarantee, but this limit has recently been raised to Rs 2 lakh, allowing farmers to avail of loans without collateral for amounts up to Rs 2 lakh.
Farmers interested in applying for a Kisan Credit Card must meet specific eligibility criteria. These include being an owner-cultivator, sharecropper, tenant farmer, or a member of a self-help or joint liability group. The applicant must be engaged in crop production or allied activities like animal husbandry or fishing. The scheme also includes provisions for non-farm activities, making it accessible to a wider range of rural workers.
Applying for a KCC is a straightforward process. Interested farmers need to visit the official website of the bank offering the scheme and navigate to the ‘Kisan Credit Card’ section. After filling in personal, farming, and financial details, farmers can submit the application and track the progress using the reference number provided. If eligible, the bank will complete the verification process and approve the loan within 3-4 working days.
Conclusion
The Union Budget 2025’s announcement to increase the Kisan Credit Card loan limit from Rs 3 lakh to Rs 5 lakh is a positive step towards empowering farmers, reducing financial barriers, and promoting growth in rural economies. By improving financial flexibility, expanding access to formal credit, and addressing the needs of small farmers, this initiative has the potential to drive sustainable agricultural development. However, its success will depend on ensuring that the benefits of this increased credit limit reach those who need it the most, particularly small and marginal farmers.