KCC Digitisation: Making Agriculture Easier

The Reserve Bank of India (RBI) had said in the early September, that it had proposed a pilot project of end-to-end digitisation of Kisan Credit Card (KCC), and the project was accomplished by the Union Bank of India a couple of weeks ago.

Actually, the objective of KCC digitisation project is to simplify the process and reduce costs for the borrowers. This is going to be a huge support for the farmers in regard with credit flow and easy loans.

How does it benefits the Farmers?

Digitisation of Kisan Credit Card will assist with making the credit dispensing process more productive and diminish costs for borrowers. The pilot project was started in Madhya Pradesh and Tamil Nadu. It is expected to concentrate on mechanisation of different processes of banks and mix of their systems with service providers.

KCC was introduction in 1998, as one of the most successful credit programs for the agricultural sector, touching grassroots farmers including tenant, lessee farmers as well as self-help-groups (SHGs) for a wide range of short-term credit needs covering the lifecycle of farming across pre-harvest, post-harvest, produce marketing, consumption, maintenance of farm assets.

Additionally, enrolled farmers automatically get access to personal accident, and disability insurance as well. The linkage of a payment card to the credit line enabled convenience and ease of use of the credit facility.

Also, the RBI said that the time from applying for a credit to its disbursal will likewise be diminished fundamentally. The time that was taken of about a month can be decreased to about fourteen days. As per RBI, provincial credit is essential for the monetary inclusion of farmers as it can meet the financial necessities of agribusiness and partnered areas and enterprises.

Harish Prasad, MD, Banking Solutions, FIS said, "This digitisation of the KCC application and approval processes can make it seamless, less error-prone process with integration into KYC databases and digitised land record databases, and has the potential to address major issues such as the prevalence of fraud around KCC facilities to farmers. And most importantly, this could make life easier for farmers as well as for banks in terms of ease of application and elimination of associated paperwork."

How it makes credit flow easy for rural populace?

Under the pilot projects, through the online process, farmers can apply for Kisan Credit Card from mobile sitting at their homes. With the help of this process, the time of farmers will be saved and there will be less congestion in banks. Farmers do not need to visit the bank for verification of land papers. The bank itself will verify the agricultural land paper online.

"With automation, I believe there will be deepening of the KCC base with more farmers opting for this product given the ease with which credit becomes available and accessible. Farmers who have relied on non-formal credit channels will find it easier to access formal credit channels via the KCC and this is expected to drive further offtake," Prasad said.

Apart from that, the RBI in its circular has said that digitalisation of KCC lending is expected to play a pivotal role in facilitating credit flow to the unserved and underserved rural population by making the credit process faster and more efficient. When fully implemented, this is expected to transform the rural credit delivery system of the country.

How do banks play a vital role in it?

This pilot project has been fixed to run in selected districts of Madhya Pradesh and Tamil Nadu with Union Bank of India and Federal Bank respectively. It emphasises on digitisation of banks in rural areas. The state governments are also giving their full cooperation in this.

Banks play a key role today in continuing to expand the base of KCC beneficiaries and the digitised process will enable automation of the application and approval processes at their end, and thus help cut down the overall TAT. As is done today, last mile engagement with the actual borrower may be covered off by the banks directly or via their business correspondents.

Prasad said, "Banks will continue to play a vital role in a digitised KCC process as they form the focal points for credit assessment and approval, funding, credit disbursement and collections and credit portfolio management. Banks have been the most important part of the channel for delivery of priority sector credit, and this role will continue undiminished."

Union Bank's step is welcoming

The Union Bank has been the first bank in the industry to launch this step under project 'Sambhav'. It said that they will gradually spread this project to other states of the country.

"The push for a digitised KCC process that Union Bank of India and Federal Bank have undertaken partnering with Reserve Bank Innovation Hub is a great move given the large-scale impact it could have around stream-lining credit access to one of the largest sectors of the Indian economy," said Prasad.

He added, "This pilot program with just a couple of banks is a precursor to a larger rollout, and given that the KCC is a key component of priority sector credit obligations of banks, there will likely be a larger rollout that spans the gamut of institutions that offer the KCC products today, viz commercial banks, RRBs, small finance banks and co-operatives."

The project was started by Reserve Bank of India CEO, A Manimekhalai in Harda in the presence of Rakesh Ranjan, chief product manager of RBIH and more than 400 farmers of the district.