Waiver of service charges on Kisan Credit Card
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General Studies 3
- Issues related to direct and indirect farm subsidies and minimum support prices
- Inclusive growth and issues arising from it.
General Studies 2
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
- Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections
In News: The Indian Banking Association (IBA) has issued advisory guidelines requesting banks to waive off the processing, documentation, inspection, ledger folio charges and all other service charges for Kisan Credit Card /crop loans upto 3 Rs lakh.
Why the waiver?
Some of scheduled commercial banks are collecting a nominal amount of service charges towards processing, documentation, inspection, etc. for agriculture loans. However, some of the banks are collecting service charges which are at a bit higher. This is not irrespective of whether the loan is sanctioned or not. This often acts as a deterrent for the farmers to approach the banks for loans.
The Kisan Credit Card Scheme:
Agriculture in India has been facing many issues — fragmented land holding, depleting water table levels, deteriorating soil quality, rising input costs, low productivity. Add to these vagaries of the monsoon. Output prices may not be remunerative. Farmers are often forced to borrow to manage expenses. Also, many small farmers not eligible for bank credit borrow at exorbitant interest rates from private sources.
When nature rides roughshod over debt-ridden farmers in the form of erratic monsoon and crop failures, they face grim options. Indebtedness is a key reason for the many farmer suicides in the country.
In India, land holding pattern is dominated by small and marginal farmers (SMF) category. Roughly 85 per cent of the total operational holding in the country (about 43 per cent of the gross cropped area) are in the SMF category. There are around 216 million small and marginal farmers (or 43 million families). Providing timely and affordable credit to this resource constrained group is the key to attaining inclusive growth.
As per parliamentary standing committee on agriculture, the losses due to climate change account for overall GDP loss of 1.5 per cent of agriculture economy. The instability in income of the farmers due to various types of risks involved in production, low bargaining power, etc, add more distress to the already affected farmers.
The Kisan Credit Card Scheme aims at providing adequate and timely credit support from the banking system under a single window with flexible and simplified procedure to the farmers to meet the short-term credit requirements for cultivation of crops, investment credit requirements for agriculture and allied activities and other needs. The KCC is necessary to procure good quality inputs to raise productivity and production.
There is no doubt that the move will provide direct benefit to farmers and ease the pressure on them. But it is high time that the Government must think that in addition to reforming the credit system, agriculture should be made profitable by ensuring fair remunerative prices, lowering the cost of cultivation, and promoting viable farmer collectives and sustainable models of agriculture.
We need to revisit the credit policy with a focus on the outreach of banks and financial inclusion. The challenge before political parties and governments is to deliver on the institutional solutions demanded by farmers.
Connecting the Dots:
- The magic wand of a waiver can offer temporary relief, but long-term solutions are needed to solve farmer woes. Discuss.