The revised Kisan Credit Card (KCC) guidelines by the state government, which tighten the terms of agricultural credit, including the requirement to pledge land as collateral for crop loans exceeding ₹2 lakh, have sparked opposition among Punjab’s farmers.
The changes, which will apply from the upcoming rabi (wheat) season starting in November, have drawn sharp criticism from farmer leaders, who argue that the stricter lending conditions will add to the financial burden on an already distressed farming community.
“It is a move to further strangle the farmers, who are already in distress and debt,” said Balbir Singh Rajewal, who heads a faction of the Bhartiya Kisan Union (BKU), a constituent of the Samyukt Kisan Morcha.
A senior official of the state cooperative department, speaking on condition of anonymity, said the collateral requirement was made mandatory by the Reserve Bank of India (RBI), leaving the state with little choice but to implement it.
Under the KCC scheme, farmers use 60% of the loan’s maximum credit limit (MCL) to meet production costs and the remaining 40% for fertilisers and agrochemicals.
Farmers’ share in PACS repayment increased
{{/usCountry}}Farmers’ share in PACS repayment increased
{{/usCountry}}The revised policy, which supersedes the earlier KCC scheme introduced in 2000, has also increased the share farmers must repay to Primary Agricultural Credit Societies (PACS), which operate at the village level and form the grassroots of the cooperative agricultural credit system.
Small and marginal farmers owning up to five acres will now have to repay 6% to the PACS from which they borrowed, while the rate for farmers owning more than five acres has been raised to 9%. Under the earlier guidelines, the respective rates were 3.3% and 5%.
Sukhwinder Singh, a farmer from Samrala who also manages a PACS in his village, questioned the requirement for farmers who are already members of the cooperative credit system to pledge land against their loans.
“It is laughable that a farmer who is a shareholder in the PACS and pays interest for the loan is also asked to submit collateral,” he said.
Singh warned that the new system could weaken the rural cooperative credit network, which has supported farmers for decades. He added that farmers could be required to pledge land worth crores to secure loans of just a few lakh rupees.
“Such decisions were not taken by any government in the past. We demand the circular be withdrawn and our union will shortly decide how to build pressure on the government for its withdrawal,” Rajewal said.
Parallel agricultural loans to attract 11% interest
The revised policy also stipulates an interest rate of 11% for farmers who take a crop or agricultural loan from a nationalised or private bank and simultaneously borrow from a PACS.
Earlier, farmers could avail of loans from both a bank and a rural credit society, with both loans carrying an interest rate of 7%. They also received a 3% interest subvention on one of the loans.
“Now, the banks and rural societies will keep tabs on different loans taken by the farmers,” a cooperative department official said.
Farmers generally take crop loans on a six-month credit cycle ahead of the two principal agricultural seasons — rabi and kharif. After selling their produce, they repay the previous loan and obtain fresh credit for the next crop cycle.
Scale of finance increased
Alongside the tighter lending conditions, the revised policy has increased the scale of finance — the amount of credit available per acre for cultivating different crops.
The credit limit for paddy has been raised to ₹39,000 per acre from ₹24,000, while that for wheat has increased to ₹30,000 per acre from ₹23,000. For sugarcane, the limit has been raised to ₹1 lakh per acre from ₹80,000.
The scale of finance has also been increased for other agricultural activities, including maize, cotton, dairy and fisheries.