Banks call for easier repayments under Kisan credit program



MUMBAI : Faced with the increase in bad loans in the agricultural sector, banks are seeking flexibility in repaying loans under the Reserve Bank of India’s Kisan Credit program, according to three people familiar with the matter. The banks are seeking to ask the RBI to allow them to renew the scheme for marginal small farmers for an amount of up to ??3 lakh, provided they only pay the interest amount, they added. KCC is renewed every year between June and July.

“All KCCs are expected to liquidate all of their outstanding debt at the end of the year, and new loans are issued for the same limit. For the MSME industry, the cash credit limit is rolled over to the following year if it only serves interest. There is no obligation to repay the principal. So we are saying that the facilities that are available for the non-agricultural sector should be available for the agricultural sector, ”said a senior banker familiar with the matter.

At the end of March 2020, KCC loans for banks amounted to ??7.09 lakh crore to 6.7 crore of active KCC card users, who make up about 40% of the total agricultural loans they make.

A State Bank of India report dated December 2020 said KCC’s banking portfolio has suffered over the years due to crop losses, unpaid prices, debt cancellations and product rigidity. loan. It therefore needs to be reconsidered closely, according to the SBI report.

Launched in 1998-99 to finance then Yashwant Sinha, KCC is intended to help farmers make decisions about how to use the money for cultivation rather than banks funding suppliers, which was the case until then. . Over the years, KCC has become one of the most popular programs for agricultural loans due to the interest subsidy program and the 4% prompt repayment incentive offered by the government, in the limit of ??3 lakhs per borrower.

Issued to farmers based on their land holdings, the KCC works like a normal credit card. Farmers can use them for the purchase of seeds, fertilizers and pesticides, in addition to production needs, but in many cases this does not happen and farmers use them to raise funds for their own sake. look after family marriages and medical needs.

A short-term crop loan is treated as an NPA (non-productive asset) if the principal or interest payment remains overdue for two crop years. Long-term crop loans become NPAs if principal or interest payments remain in arrears for a crop year. It is not unusual for some banks for a new loan cycle to begin even before existing loans are fully repaid, the bankers said.

Agriculture is one of the main sources of bad debt for most banks. The gross APMs of agricultural loans represented 15.85% of the SBI’s total credit at end-March 2020 against 11.56% in March 2019. For the 2020-2021 fiscal year, agricultural APMs fell to 13.7% because of the moratorium. According to the RBI Trends and Progress report, the total gross NPA in agriculture stood at 1.26 lakh crore at the end of March 2020, which is 15% of the total NPA.

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