The Reserve Bank of India (RBI) has released the final guidelines for the Kisan Credit Card (KCC) scheme.
The central bank has accepted several suggestions received from banks and other stakeholders and has also given farmers and banks more time to adapt to the new rules.
One of the biggest announcements is that the revised KCC framework will now come into effect from January 1, 2027.
Existing KCC Loans Will Continue Under Old Rules
RBI has clarified that KCC loans sanctioned before January 1, 2027, will continue to follow the existing guidelines until they are renewed or reach maturity.
This decision has been taken considering the practical and operational challenges involved in implementing the new framework at the ground level.
The central bank has also stated that these revised guidelines will not apply to overseas branches of Indian banks.
Major Changes Approved by RBI
The RBI has accepted several important recommendations while finalising the new KCC rules.
Under the revised framework, banks can use District Level Technical Committee (DLTC) Scale of Finance references while determining credit requirements.
The guidelines also include an indicative list of technology-related investments that can be financed through KCC.
Another important change is that Flexi KCC facilities will now be available for allied agricultural activities as well.
Additionally, KCC credit limits will be rounded off to the nearest ₹1,000, making calculations simpler for both banks and borrowers.
Important Clarification on Scale of Finance
The RBI has also clarified how banks should calculate loan limits when the Scale of Finance remains unchanged.
If the notified Scale of Finance is not revised in a particular year, banks should continue using the existing scale.
They cannot automatically increase the drawing limit by 10%, as was being suggested by some stakeholders.
The Scale of Finance refers to the estimated cost required to cultivate a particular crop on a specific area of land during one crop season.
Flexi KCC to Benefit Small and Marginal Farmers
Small and marginal farmers will be able to access a flexible credit limit ranging from ₹10,000 to ₹50,000 under the Flexi KCC facility.
The credit limit will not be linked solely to the value of land owned by the farmer. Instead, banks will consider several factors, including:
Crops being cultivated
Post-harvest storage requirements
Farm-related expenses
Household consumption needs
Investment needs for agriculture and allied activities
This is expected to make credit more accessible for farmers with limited land holdings.
Investment Loans to Be Treated Separately
RBI has also accepted the suggestion to keep long-term investment loans outside the KCC framework.
If a loan has a tenure of more than six years, it can be treated as a separate credit facility. Banks may also maintain separate loan accounts for working capital needs and long-term investments.
What Suggestions Did RBI Reject?
While finalising the guidelines, RBI rejected several demands made by stakeholders.
The central bank did not approve proposals to:
Increase the collateral-free loan limit
Raise the Flexi KCC borrowing limit
Allow lending beyond the prescribed Scale of Finance
Simplify the drawing limit calculation method
Permit KCC renewal based only on interest payments
According to RBI, these changes could increase credit risk, weaken financial discipline and lead to excessive lending.
Insurance Premiums Can Be Deducted Only With Consent
The revised guidelines also provide greater protection to borrowers.
RBI has made it clear that banks must obtain explicit consent from farmers before deducting insurance premiums from their KCC accounts.
The regulator also rejected suggestions related to free life and health insurance for KCC holders, stating that such decisions fall under the policy domain of the Central Government.
What Does This Mean for Farmers?
The new guidelines bring clarity and flexibility to the Kisan Credit Card scheme while ensuring that credit discipline is maintained.
Most importantly, farmers who already have KCC loans do not need to worry about immediate changes, as existing loans will continue under the current rules until 2027 or their next renewal.
The revised framework is expected to make KCC operations more transparent, improve access to credit for small farmers and support agricultural as well as allied activities across the country.
