RBI Launches Pilot Project to Digitise KCC; Aims at Transforming Rural Credit Delivery


To transform rural credit delivery system, the Reserve Bank has decided to launch pilot projects to digitise Kisan Credit Card (KCC) in Madhya Pradesh and Tamil Nadu. Based on the learnings from the pilot, it is planned to expand the digitalisation of KCC lending to other districts in these two states and gradually across the country, the RBI said in a statement.

The pilot project would entail automation of various processes within banks and integration of their systems with the service providers, it said, adding, the proposed digitalisation of the KCC lending process will make it more efficient, reduce costs for borrowers and reduce turn around time (TAT) significantly. The TAT from loan application to disbursement has also been rather high, ranging from two to four weeks.

Rural credit is closely related to inclusive economic growth, as it caters to the requirements of agriculture and allied activities, ancillary industries, small businesses, etc. At present, it said, the process for getting such finance requires customer to visit a bank branch in-person along with the proof of land ownership and other documents. Sometimes, the customer may be required to visit the bank branch multiple times.

Considering the challenges associated with rural finance in India, digitalisation of various aspects of rural finance is an important objective of RBI’s Fintech initiatives, it said. In this endeavour, it said, a pilot project for end-to-end digitalisation of Kisan Credit Card (KCC) lending, developed by the Reserve Bank Innovation Hub (RBIH) in association with RBI is being taken up.

The pilot will commence in September 2022 in select districts of Madhya Pradesh and Tamil Nadu with Union Bank of India and Federal Bank, respectively, as partner banks and with active cooperation of the respective State governments, it said. “This pilot project on 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 has the potential to transform the rural credit delivery system of the country,” it said.

The KCC scheme was introduced in 1998 for issue of farm loan to farmers on the basis of their holdings for uniform adoption by the banks so that farmers may use them to readily purchase agriculture inputs such as seeds, fertilizers, pesticides etc. and draw cash for their production needs. The scheme was further extended for the investment credit requirement of farmers viz. allied and non-farm activities in the year 2004.

Subsequently, in December 2020, Prime Minister Narendra Modi launched Revised Scheme to Kisan Credit Card (KCC) with aim to provide adequate and timely credit support from the banking system under a single window to the farmers for their cultivation and other needs.

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