RBI Revises Kisan Credit Card Framework to Standardize Crop Seasons and Align with Asset Classification Norms
The Reserve Bank of India (RBI) on Friday revised the Kisan Credit Card (KCC) framework, standardizing the definition of crop seasons and aligning it with banking asset-classification norms. This move aims to bring greater uniformity in farm loan sanctioning and repayment schedules.
Key Changes in the Revised Framework
The revised directions, effective from January 2027, seek to streamline the delivery of credit to farmers and borrowers engaged in agriculture and allied activities. The RBI stated that the new directions ensure "adequate and timely credit support" under the KCC Scheme, meeting working capital and investment credit needs through a composite facility with simple and standard procedures.
A key change is the modification of crop season definitions to align with Income Recognition and Asset Classification (IRAC) norms. For the KCC Scheme, crop seasons are now standardized at twelve months for short-duration crops and eighteen months for long-duration crops. Crop season refers to the period from cultivation to harvesting and marketing.
Collateral Requirements and Flexibility
On collateral requirements, the RBI declined suggestions for a higher collateral-free lending threshold, noting the limit was revised in December 2024. Banks will continue to waive collateral security and margin requirements for agricultural loans, including allied activities, up to Rs 2 lakh per borrower.
However, voluntary pledge of gold and silver as collateral for agriculture loans up to the collateral-free limit will not violate guidelines on collateral-free lending to the agriculture sector. For loans above Rs 2 lakh, banks will determine collateral and margin requirements per their credit policies and RBI guidelines.
Additional flexibility is provided for KCC loans backed by hypothecation of crops or stock with recovery tie-up arrangements. In such cases, banks may waive collateral security for loans up to Rs 3 lakh.
Periodic Review and Renewal
The RBI directed banks to undertake periodic review and renewal of short-term credit limits for crop cultivation and allied activities in line with their internal credit policies.
The Kisan Credit Card scheme remains the primary institutional credit mechanism for farmers, providing working capital and investment support for crop cultivation, dairy, fisheries, and other allied agricultural activities. The revised framework follows public consultations on draft directions issued in February 2024.
