AN ANALYSIS OF KISAN CREDIT CARD: A TOOL FOR AGRICULTURAL FINANCE IN INDIA

Rural development means nothing but the transformation of the subsistence agricultural
production to a market oriented agricultural economy. Availability and access to financial resources is one
of the key elements to this transition. Financial resource is a very important, if not the most important,
factor in economic development. Shortage of finance is one of the major problems facing small farmers.
Farmers need financial resource to buy improved agricultural inputs and farm implements so that they can
increase their output and income level and break the cycle of poverty. Farmer’s investment in these
technologies cannot be real without having in place organizations and systems that are capable of
adequately providing rural financial services to farmers. So, the effort to develop agriculture could suffer in
the absence of a strong financial base that aims at expanding access to credit for small farmers. The
delivery mechanism for agricultural credit in India is fundamentally flawed. This has been acknowledged in
the media; numerous academic studies commissioned by the government and non governmental agencies,
and is borne out by the dismal economic condition of the average Indian farmer.
The paper looks into the agricultural credit in terms of Kisan Credit Card. Consequent upon the
announcement in the budget speech for the year 1998-99, NABARD, in consultation with major banks,
formulated a model scheme for issue of Kisan Credit Card. The scheme aimed at adequate and timely
financial support in a flexible and cost effective manner from the banking system to the farmers for their
cultivation needs including purchase of inputs. The scheme was circulated to banks by RBI/NABARD.
Kisan card within short span of time has established itself as a fairly popular credit product among the
farming community. It is expected that this would help the farmers in easy and timely access to much
desired institutional credit. The study brought out the fact that Kisan card has been appreciated and
accepted both by the bankers as well as farmers. Despite all this, Kisan card scheme is not free of problems.
Based on the discussion held in the field with farmers and bankers, the paper brought out certain issues
relating to policy as well as operational aspects of Kisan card which may require attention of the agencies
concerned.
The paper highlights the agricultural credit scenario in India and focuses on the role of formal financial
institutions in delivery of agricultural credit. The study notes that both formal and informal sources of
credit are important in the India context. However, the significance of formal credit institutions in terms of
credit delivery for the agricultural sector has increased over time. The main formal financial institutions
involved in the delivery of agricultural credit are commercial banks, co-operative banks and Regional Rural
Banks.
This paper attempts to analyse the issues in agricultural credit in India. The analysis reveals that the credit
delivery to the agriculture sector continues to be insufficient. It appears that the banking system is still
hesitant on various grounds to provide credit to small and marginal farmers. The paper presents the result
of the survey on agricultural credit conducted in village Asmoli, the biggest village in Moradabad district in
Sambhal constituency in Uttar Pradesh.