NEW DELHI: The Indian government, during the Union Budget 2025 presentation on February 1, announced significant enhancements to the Kisan Credit Card (KCC) scheme, raising the loan ceiling from ₹3 lakh to ₹5 lakh. Union Finance Minister Nirmala Sitharaman emphasized the importance of this initiative, stating, "Kisan Credit Card facilitates short-term loans for 7.7 crore farmers, fishermen, and dairy farmers. The loan limit under the modified interest subvention scheme will be enhanced from ₹3 lakh to ₹5 lakh for loans taken through KCC." This change is expected to provide millions of farmers with improved access to credit, thereby reducing their dependence on informal lending sources and supporting their financial needs.
The KCC scheme, launched initially in 1998, aims to meet farmers' short-term working capital requirements. Over the years, it has become instrumental in reducing reliance on informal credit, with the Economic Survey noting the decline of non-institutional borrowing from 90% historically to around 25% by FY22. Sitharaman's announcement indicates the government's continued commitment to enhancing agricultural financing, which is supported by the fact there are currently 7.75 crore operational KCC accounts with outstanding loans totaling ₹9.81 lakh crore.
Experts agree this move will stimulate rural economies. Ritika Nayyar, Partner at Singhania & Co., stated, "This initiative will play a crucuial role in strengthening rural economies and eventually ensuring long-term agricultural growth." By increasing the loan limits, farmers will have greater financial flexibility to invest in quality seeds, modern equipment, and sustainable farming practices, which are imperative for improving yield and profitability.
Ashwin Sapra from Cyril Amarchand Mangaldas elaborated, saying, "This increase in loan limits will help our farmers overcome immediate financial needs during crop cycles." The sentiment is echoed by Sandeep Chilana, Managing Partner of Chilana & Chilana Law Offices, who pointed out potential challenges: "The government must also put safeguards to prevent over-borrowing and to translate increased credit benefits effectively." This highlights the necessity of responsible management of credit access to truly empower the farming community.
During the budget presentation, additional initiatives were announced to improve agricultural practices and sustainability. Sitharaman indicated plans to recommission three shut-down urea plants and establish new facilities aimed at self-reliance. A project will be launched with annual production capacity of 12.7 lakh metric tonnes of urea to boost domestic supply and cater to the fertilizer needs of farmers.
The overall KCC scheme not only includes support for major crops but has been extended to fisheries and animal husbandry. Presently there are 1.24 lakh KCCs issued to fisheries and approximately 44.40 lakh linked to animal husbandry activities. This expansion indicates the government's commitment to diversifying the support provided to farmers engaged across multiple agricultural sectors.
Notably, Kisan Credit Cards offer loans at interest rates as low as 4% per annum after factoring subsidy incentives of 2% interest support and additional benefits for timely repayments. This financial model plays a pivotal role by ensuring farmers’ accessibility to credit for operational needs without the crippling burden of high-interest loans traditionally associated with informal lenders.
Further enhancements to the KCC were also part of the larger budget strategy aimed at strengthening India’s agricultural framework. The Budget 2025 incorporates initiatives to bolster fisheries through effective utilization of marine resources, particularly benefitting regions like the Andaman and Nicobar Islands and coastal areas, thereby creating jobs and stimulating economic activity.
Gaurav Grover, CEO of ofi India, emphasized the role of agriculture as the “first engine” for growth, pointing to KCC as a significant driver for supporting the broader agri-sector. He remarked, "By availing of KCC, farmers are able to access working capital loans at subsidized interest rates, which helps them meet their short-term financial needs for activities. Farmers also have the option to benefit from livestock insurance, personal insurance, asset insurance, and health insurance wherever the product is available."
With the implementation of these enhancements, the Kisan Credit Card scheme is positioned to not only provide necessary financial support to India's vast farming community but also to revitalize the agricultural sector as well as related industries. The increase of loan limits under the KCC scheme reflects the government's dedication to empowering farmers and improving rural livelihoods, showing the initiatives are more than just financial instruments; they are integral to India's path toward agricultural self-sufficiency and growth.