Instrument to Reduce Transaction Cost in Rural Lending • Kissan Credit Cards - reduce the transaction cost of the borrowers and lenders - flexibility and convenience to the farmers in borrowing
Features of Kissan Credit Card 1. Eligibility of farmers • existing borrowers having good track record for the last 2-3 years • existing and new borrowers (All farmers with requirement of production credit Rs. 5000 and above) – Syndicate Bank • farmers having one acre of irrigated land – Allahabad Bank, PNB • All borrowers for tractor loan – Punjab & Sindh Bank • Owner cultivators only – Aligarh RRB
Features of Kissan Credit Card 2. Minimum credit limit - Rs. 3000 to 5000 3. Maximum credit limit - no maximum limit - slabs according to size of holdings (Allahabad Bank & PNB)
Features of Kissan Credit Card 4. Basis for fixation of credit limit - operational land holding, cropping pattern and scale of finance for each crop - 50 % of the total income of the family from all sources – Allahabad Bank and PNB
Features of Kissan Credit Card 6. Fixation of seasonal limit - no seasonal limit, entire limit sanctioned can be operated throughout the year. - seasonal limit based on nature of crop - seasonal limit if total credit limit is above 25000 - seasonal limit expires if not used - month-wise limit depending upon cash flow (Bank of India)
Features of Kissan Credit Card 7. Separate limit for Non-farm activities or allied activities - 10 to 30 % of crop credit limit as additional credit for allied activities - additional fixed amount per activity - actual requirement and sanction separately - Clubbed in crop credit limit - some percentage of crop credit limit as consumption loan (contingency)
Features of Kissan Credit Card 8. Facility of drawl at other branches - only card issuing branch - all branches - identified branches within the district - only literate borrowers can avail this facility - charge service charges for this facility - 2-3 per cent of cash withdrawn as service charge
Features of Kissan Credit Card 9. Repayment - specific repayment norms - fixing sub-limit (separately for rabi and kharif) - operation on next sub-limit is possible when repayment for previous sub-limit are made.
Features of Kissan Credit Card 10. Insurance of the card holder - in few cases (Andhra Bank, Allahabad Bank and Vijaya Bank), Rs. 1 lakh - premium to be born by card holder - premium for small and marginal farmers is shared between card holder and bank
Features of Kissan Credit Card 11. Issue of cheque book - yes but only to literate borrowers - yes but given only to existing borrowers with good track record - no, withdrawal only through debit slip at the card issuing branch only
Features of Kissan Credit Card 12. Service charges - exempted small borrowers (Canara bank, UCO bank) - 100 as admission fee/membership fee - Rs. 200 as fee for duplicate card
Features of Kissan Credit Card 13. Opening of Saving Bank Account Except Syndicate bank, none of the other commercial banks have made it compulsory for borrower to open a saving bank account with the bank branch to avail the kissan card facility
Features of Kissan Credit Card 14. Payment of interest on credit balance - No interest in most of the cases - Few banks prescribe certain minimum credit balance (Rs. 500) for paying the interest @ 4 percent p.a.