Concessional agriculture credit through KCC scheme, on the one hand, has undoubtedly led to immense benefits for the rural economy and banking business, but on the other hand crores of cultivators in India are still deprived of the intended benefits despite the best efforts of Government of India (GoI), State Governments and banks. Furthermore, with several well-intentioned relaxations provided over the years in the scheme, the banking system seems to be reaching a blind alley and may not find it easy to expand the coverage unless major policy changes are introduced, and a well-coordinated strategy is adopted. Here we briefly discern the past developments and look at feasible steps for streamlining the implementation of the KCC scheme.

Prior to the launching of the model KCC scheme, credit to farmers was dispensed under the traditional crop loan system, and the three-tier cooperative structure played a dominant role. During this period, RBI / National Bank for Agriculture and Rural Development (NABARD), and GoI had more expectations from cooperative banks which had been specially created to meet short term (ST) credit needs of farmers. This is evident from the data of 1998-99 when total ST credit (crop loans) sanctioned in India was INR 20,610 crore, of which commercial banks had a share of 37 percent, and cooperatives had a much higher share of 52 percent. During the four years after launching of the KCC scheme, substantially good results emerged due to large scale participation by commercial banks. Acknowledging this, Union Finance Minister in his Budget Speech for the year 2002-2003 stated that ‘KCCs introduced in 1998-99, has been a resounding success and have helped farmers considerably in their access to agricultural credit. An additional 63 lac KCCs have been issued up to December 31, 2001, taking the total to INR 2.07 crore’.

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