{"id":38982,"date":"2025-03-11T19:00:09","date_gmt":"2025-03-11T13:30:09","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=38982"},"modified":"2025-03-11T20:23:03","modified_gmt":"2025-03-11T14:53:03","slug":"kisan-credit-card-bad-loans-rise","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/11-03-2025\/kisan-credit-card-bad-loans-rise","title":{"rendered":"Farm Lending: Rise of Kisan Credit Card Bad Loans"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Agriculture; Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Recent data reveals that bad loans under the <strong>Kisan Credit Card (KCC) scheme<\/strong> have surged by <strong>42% over the past four years<\/strong>, highlighting the <strong>financial stress in the agricultural sector.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Understanding Kisan Credit Card (KCC) Scheme (1998)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>About: <\/strong>It is designed to provide <strong>short-term credit to farmers<\/strong> for agricultural and allied activities, based on the recommendations of the<strong> R.V. Gupta Committee.<\/strong><\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"b1d2d3\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"978\" height=\"338\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/eligibilty-for-kisan-credit-card.png\" alt=\"eligibilty-for-kisan-credit-card\" class=\"not-transparent wp-image-38983\" style=\"--dominant-color: #b1d2d3; width:470px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/eligibilty-for-kisan-credit-card.png 978w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/eligibilty-for-kisan-credit-card-300x104.png 300w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/eligibilty-for-kisan-credit-card-768x265.png 768w\" sizes=\"auto, (max-width: 978px) 100vw, 978px\" \/><\/figure>\n<\/div>\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Features:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Issued by commercial banks, cooperative banks, and regional rural banks.<\/li>\n\n\n\n<li>Covers crop production needs (seeds, fertilizers, pesticides, etc.).<\/li>\n\n\n\n<li>Includes working capital for allied activities like dairy, poultry, and fisheries.<\/li>\n\n\n\n<li>Can be used for <strong>farm machinery, irrigation, and post-harvest expenses.<\/strong>\n<ul class=\"wp-block-list\">\n<li>A KCC loan is classified as NPA if unpaid within three years of disbursal.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Working of KCC Scheme:<\/strong><\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"dbddec\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"750\" height=\"612\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/Working-of-KCC-Scheme.png\" alt=\"Working-of-KCC-Scheme\" class=\"not-transparent wp-image-38984\" style=\"--dominant-color: #dbddec; width:346px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/Working-of-KCC-Scheme.png 750w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/Working-of-KCC-Scheme-300x245.png 300w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/figure>\n<\/div>\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>About Non-Performing Assets (NPAs)<\/strong><br>&#8211; These refer to loans or advances for which the principal or interest payment remains overdue for more than 90 days.<br><strong>Types<\/strong><br>&#8211; <strong>Substandard Assets:<\/strong> NPA for less than or equal to 12 months.<br>&#8211; <strong>Doubtful Assets:<\/strong> NPA for more than 12 months.<br>&#8211; <strong>Loss Assets:<\/strong> Unrecoverable loans, identified by the bank or RBI.<br><strong>RBI Guidelines For Agricultural Loans (as NPAs)<\/strong><br>&#8211; <strong>Short-term crop loans<\/strong> are considered NPAs if payment is overdue <strong>for two crop seasons.<\/strong><br>&#8211; <strong>Long-term agricultural loans<\/strong> become NPAs if overdue <strong>for one crop season.<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Current Trends in Agricultural NPAs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>According to data from the RBI, the outstanding NPAs in KCC accounts of scheduled commercial banks <strong>(excluding regional rural banks)<\/strong> increased from \u20b968,547 crore at the end of March 2021 to \u20b997,543 crore by December 2024.<\/li>\n\n\n\n<li>It underscores the growing challenges faced by farmers in repaying their loans.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img data-dominant-color=\"e0e3e3\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"544\" height=\"503\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/kcc-revolving-cash-credit-facility-offered-to-farmers.png\" alt=\"kcc-revolving-cash-credit-facility-offered-to-farmers\" class=\"not-transparent wp-image-38985\" style=\"--dominant-color: #e0e3e3; width:372px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/kcc-revolving-cash-credit-facility-offered-to-farmers.png 544w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2025\/03\/kcc-revolving-cash-credit-facility-offered-to-farmers-300x277.png 300w\" sizes=\"auto, (max-width: 544px) 100vw, 544px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Major Causes of Rising NPAs in Agriculture<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Unpredictable Weather and Climate Change: <\/strong>Erratic rainfall, frequent droughts, floods, and changing weather patterns directly impact crop yields, making it difficult for farmers to repay loans.\n<ul class=\"wp-block-list\">\n<li>With limited insurance coverage, crop failures lead to defaults on agricultural credit.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Low Farm Income and Market Volatility:<\/strong> Despite government support, farmers often struggle with low productivity and unremunerative prices.\n<ul class=\"wp-block-list\">\n<li>Market price fluctuations, lack of assured MSP for all crops, and inadequate procurement mechanisms contribute to financial distress.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Loan Waiver Schemes and Moral Hazard: <\/strong>State and central governments frequently announce loan waivers as a relief measure, encouraging willful defaults.\n<ul class=\"wp-block-list\">\n<li>Farmers often anticipate future waivers, leading to poor repayment discipline.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Inadequate Risk Management by Banks:<\/strong> Banks are sanctioning loans without sound risk assessment.<\/li>\n\n\n\n<li><strong>Structural Weakness in Agricultural Finance: <\/strong>Small and marginal farmers, who form 86% of India\u2019s farming community, have limited access to institutional credit.\n<ul class=\"wp-block-list\">\n<li>Dependence on informal moneylenders results in debt traps and an inability to repay formal loans.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Delay in Crop Insurance Settlements: <\/strong>Pradhan Mantri Fasal Bima Yojana (PMFBY) has faced delays in claim settlements, leaving farmers unable to repay loans.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Implications of Rising Agricultural NPAs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Stress on Banking System:<\/strong> High NPAs reduce the ability of banks to extend fresh loans, impacting overall agricultural credit growth.\n<ul class=\"wp-block-list\">\n<li>RRBs and Cooperative Banks, which primarily cater to farmers, suffer from financial instability.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Increased Fiscal Burden:<\/strong> The government often compensates banks for loan waivers, straining fiscal resources and diverting funds from productive rural investments.<\/li>\n\n\n\n<li><strong>Economic and Social Distress:<\/strong> Indebtedness is a key reason behind farmer suicides, particularly in states like Maharashtra, Karnataka, and Punjab.\n<ul class=\"wp-block-list\">\n<li>Rising NPAs lead to rural distress, impacting employment and food security.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Credit Crunch for Genuine Farmers:<\/strong> Due to higher default rates, banks tighten credit norms, making it difficult for genuine, creditworthy farmers to access loans.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Measures to Address Rising Agricultural NPAs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Strengthening Crop Insurance and Risk Mitigation:<\/strong> Faster claim settlements under PMFBY and expansion of insurance coverage can reduce financial distress.\n<ul class=\"wp-block-list\">\n<li>Promoting climate-resilient farming and crop diversification can mitigate weather-related risks.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Improving Credit Discipline:<\/strong> Restricting loan waivers to genuinely distressed farmers and ensuring targeted relief can prevent willful defaults.\n<ul class=\"wp-block-list\">\n<li>Encouraging timely repayment incentives, such as interest rate discounts, can improve repayment behavior.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Enhancing Institutional Credit Access:<\/strong><strong>Expanding Kisan Credit Card (KCC) <\/strong>coverage to all small and marginal farmers.\n<ul class=\"wp-block-list\">\n<li><strong>Strengthening Farmer Producer Organizations (FPOs)<\/strong> to ensure collective bargaining for better credit access.<\/li>\n\n\n\n<li>Online application through banks&#8217; websites &amp; <strong>Common Service Centers (CSCs).<\/strong><\/li>\n\n\n\n<li>Integration with <strong>PM-KISAN and Aadhar <\/strong>for easier verification.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Strengthening Bank Supervision and Credit Monitoring:<\/strong> Implementing technology-driven loan tracking to identify early signs of distress.\n<ul class=\"wp-block-list\">\n<li>Increasing financial literacy programs to educate farmers on loan management and risk mitigation.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Encouraging Diversification and Value-Addition:<\/strong> Promoting agribusiness, food processing, and non-farm activitie\n<ul class=\"wp-block-list\">\n<li>Strengthening supply chains and storage infrastructure to minimize post-harvest losses.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/indianexpress.com\/article\/express-exclusive\/farm-lending-kisan-credit-card-bad-loans-rise-by-42-in-four-years-9879584\/\" rel=\"nofollow noopener\" target=\"_blank\">Source: IE<\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recent data reveals that bad loans under the Kisan Credit Card (KCC) scheme have surged by 42% over the past four years, highlighting the financial stress in the agricultural sector.<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-38982","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/38982","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=38982"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/38982\/revisions"}],"predecessor-version":[{"id":39004,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/38982\/revisions\/39004"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=38982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=38982"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=38982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}