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India is an agrarian economy, with about 65 per cent of the population in rural areas and 50 per cent of the workforce in agriculture. The Finance Minister’s carefully curated, compiled and articulated second and third packages rightly emphasised the agricultural sector for these turbulent times. She desired, among others, that all farmers get a Kisan Credit Card (KCC) to avail concessional credit and converge with the PM-Kisan for benefit.
The KCC concept was developed by NABARD in 1998 and launched by the banks. It enables farmers to avail credit for crop production, consumption and maintenance of machinery, by simply swiping a RuPay debit card. Why this universal coverage took time and how it can be made effective is the remit of this article.
A farmer requires many ingredients for her/his farming operations; farm and weather advisory, seeds, irrigation, fertilisers, pesticides, credit, farm labour, agricultural machinery and transparent markets almost in this order. ‘Doubling of Farmers Income’ (DFI) — a clarion call of the Prime Minister — can be achieved through increase in yields, reduced cost of production, remunerative prices, supplementary income from off-farm and region-specific models.
These five pillars are in the domain of State governments, but not bank credit. Bank credit is very important for financial inclusion, formalisation of the economy and weaning farmers away from usurious money lenders. But credit only becomes effective when the other ingredients are added in required proportion and at the right time.
The Ministry of Finance and banks, working in unison, have created the JAM trinity and are leveraging its strengths. The nine crore PM-Kisan and seven crore KCC beneficiaries are a result of this. The expansion and coverage of gaps is a matter of time. KCC is not a number generated by bankers, and is in fact a transformative initiative. Having the State governments acknowledge that banks are serving its own people and joining them will be the force multiplier that makes DFI real.
The process of issue of KCC involves a KYC prepared by bank and validation of land records and creation of charge by the State Revenue Department. This process takes time, and the farmers are usually left to fend for themselves. Agriculture Departments are usually not involved in many States, even though the KCC is for agricultural operations.
After the above requirements are in order, banks issue KCC reasonably quickyl. But there are aberrations in this ecosystem. About 10-15 per cent of our farmers are share-croppers/tenants, given the restrictive land leasing laws. Add to this about 20 lakh marginal farmers because of the law of inheritance — from the father to the son. Hence, share-croppers/tenants and newly-created marginal farmers can’t access KCC or the PM Fasal Bhima Yojana because they don’t have land titles.
The Loan Eligibility Card of the Government of Andhra Pradesh under the Land Licensed Cultivators Act, 2011, is a right step in ensuring KCC and crop insurance to farmers with no clear land titles. Other States have not yet moved on this, despite the NITI Ayog’s prodding.
Digitisation of land records, another key ingredient, is not yet complete across India. Bankers are unable to create charge online even in those States where land records are digitised because of bandwidth issues. The loaning process and documentation vary across banks, and the final KCC docket is a big bunch of documents that takes time to assemble (by farmers or consultants) and get sanctioned by bankers.
When State governments come on board, many things become possible: simplified application in vernacular language, identifying uncovered farmers, appropriate scales of finance so that correct amounts are disbursed as loan, facilitation in KCC application submission, timely disbursements of crop loans, operationalising other loans which KCC encompasses, advisories and remunerative prices leading to farmers’ welfare.
Agriculture credit will thrive only when agriculture blooms.
The writer is Deputy Managing Director, NABARD. Views are personal
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