Budget 2025 has been one of the most promising budgets in recent years and aims to address the needs of the masses for a long time. One of its important announcements, the strengthening of interest sub-restrictions for Kisan Credit Cards (KCCs), is undoubtedly a major move. However, there is this growing perception that increasing credit limits will benefit all farmers. However, reality is even more subtle. Raising short-term credit limit interest offers from £3 lakh to £5 lakh is likely to benefit only large-scale farmers, not the majority of small and marginal farmers.
KCC offers both short-term and term credits, depending on the farmer’s needs. Short term credits are primarily used for operational costs and are determined by the size of the technical committee and farmer’s land holdings at the district level. An additional 30% credit limit is also offered for household consumption and farm maintenance. There is no cap on short-term loans under KCC, but the interest subvation, which previously concluded with £3 lakh, has been raised up to £5. However, the criteria for term credits have not changed, so this discussion will focus only on short-term credits.
As mentioned above, KCCs are heavily dependent on the size of their land holdings and affect credit limits that are subject to interest subvation. This means that farmers who previously had no access to credits above £3 will not benefit from the increase. Those with large enough land ownership – only those who were already able to rent above previous limits will receive interest submarines for more money.
Misleading numbers
The claim that 7.7 Krull farmers will benefit from this policy can be misleading. This diagram represents all KCC holders, but not all come from an increase in limits. Nevertheless, the role of KCC in improving farmers’ financial security remains important. The scheme promotes financial inclusion and farm insurance, helping even marginalized farmers to move away from exploitative, informal sources of credit. Research shows that credit availability had a significant impact on farmers’ incomes, allowing KCC to have better sustainability by allowing more farmers to access critical inputs.
Although increasing the limits of subvention have long been delayed, it is not enough to make the scheme more accessible or beneficial for a wider section of farmers. There are a few challenges that follow, and most importantly, the repayment schedule. Farmers must repay the loan within 12 months, but farm income does not guarantee normal cash flow. Even after harvesting, cash inflows may be delayed, making timely repayments difficult.
By introducing repayment periods, farmers begin paying off loans in a few months and extending repayment tenure, providing much needed flexibility, allowing smallholder farmers to manage their credit more effectively. , you can make better farming decisions. For short-term loans, an additional 10% credit limit is provided for household expenses under KCC. This should be revised taking into account the ever-increasing cost of living.
Furthermore, Indian agriculture has an undeveloped system for integrated agriculture, mainly due to its high implementation costs. Integrated agriculture shows the significant revenue growth of small farms, a key highlight of Indian agriculture, but this opportunity has not been tracked. Incorporating special provisions for integrated farming through the KCC may help increase farm income.
Data transparency
Information about the KCC is fairly opaque and there is no public data on credit restrictions, credit usage, or repayment timelines. So it is completely unclear how much beneficiaries will benefit from this increased credit limit.
Currently, only data on KCC payments are reported, making it difficult to assess the inclusiveness of the scheme for small and marginal farmers. Although several major studies highlight their limited participation, this issue remains unresolved unless comprehensive data on credit allocation and usage are published. Providing more transparent data will help policy makers and researchers assess the true impact of the scheme and address more effectively existing gaps.
There are many things that require this scheme, but increasing subvention limits can be a huge step forward. Provisions to increase personal use restrictions to increase from 10%, provide repayment delays and promote the implementation of integrated farming through KCC could benefit much more significantly for small and marginal farmers. It has sex. Increasing data availability in KCC will help contribute to the creation of knowledge that uncovers the invisible problems this scheme may have.
The author is the research aide of the National Council on Applied Economic Research.
