The Reserve Bank of India (RBI) had said earlier in September that it had proposed a Kisan Credit Card (KCC) end-to-end digitization pilot project, and the project was carried out by the Union Bank of India. a couple of weeks ago.
In reality, the goal of KCC’s digitization project is to simplify the process and reduce costs for borrowers. This is going to be a great support for farmers in terms of credit flow and easy loans.
How does it benefit farmers?
The digitization of the Kisan credit card will help make the credit granting process more productive and lower costs for borrowers. The pilot project was started in Madhya Pradesh and Tamil Nadu. It is expected to focus on the automation of the different processes of the banks and the mixing of their systems with service providers.
KCC was introduced in 1998, as one of the most successful credit programs for the agricultural sector, reaching grassroots farmers, including tenant and tenant farmers, as well as SHGs. for a wide range of short-term credit needs that cover the life cycle of agriculture in pre-harvest, post-harvest, product marketing, consumption, maintenance of agricultural assets.
Additionally, enrolled farmers automatically gain access to personal accident and disability insurance as well. Linking a payment card to the line of credit allowed for the convenience and ease of use of the line of credit.
In addition, the RBI said that the time from applying for a loan to its disbursement will also be fundamentally shortened. The time taken from about a month can be reduced to about fourteen days. According to RBI, provincial credit is essential for the monetary inclusion of farmers, since it can meet the financial needs of agribusinesses and associated areas and companies.
Harish Prasad, MD, Banking Solutions, FIS said, “This digitization of KCC’s application and approval processes can make it a seamless and less error-prone process with integration into KYC databases and customer registration databases. digitized land, and has the potential to address major issues like the prevalence of fraud at KCC facilities for farmers, and more importantly, this could make life easier for farmers and banks in terms of ease of application and elimination of associated paperwork”.
How do you facilitate the flow of credit for the rural population?
According to the pilot projects, through the online process, farmers can apply for the Kisan credit card from their mobile phones at home. With the help of this process, time will be saved for farmers and there will be less congestion at the banks. Farmers do not need to visit the bank to verify ownership documents. The bank itself will check the role of agricultural land online.
“With automation, I think it will deepen KCC’s base with more farmers opting for this product given the ease with which credit is available and accessible. Farmers who have relied on non-formal credit channels will find it easier access formal credit channels through KCC and this is expected to drive higher demand,” Prasad said.
Apart from that, the RBI in its circular has said that the digitization of KCC loans is expected to play a critical role in facilitating the flow of credit to the unserved and underserved rural population by making the credit process faster and efficient. When fully implemented, this is expected to transform the country’s rural credit delivery system.
How do banks play a vital role in it?
This pilot project has been set to run in selected districts of Madhya Pradesh and Tamil Nadu with Union Bank of India and Federal Bank respectively. It emphasizes the digitization of banks in rural areas. State governments are also giving their full cooperation in this.
Banks play a key role today in continuing to expand KCC’s beneficiary base and the digitized process will enable the automation of application and approval processes at their end and thus help reduce the overall TAT. As it is done today, the last mile commitment with the real borrower can be covered by the banks directly or through their commercial correspondents.
Prasad said, “Banks will continue to play a vital role in a digitized KCC process as they form the focal points for credit evaluation and approval, financing, credit disbursement and collection, and credit portfolio management. Banks have been the most important part of the channel for the delivery of priority sector credit, and this role will continue unabated.”
Union Bank step is welcome
Union Bank has been the first bank in the industry to launch this step under the ‘Sambhav’ project. He said that little by little they will extend this project to other states of the country.
“The push for a digitized KCC process that the Union Bank of India and the Federal Bank have undertaken in partnership with the Reserve Bank Innovation Center is a big step given the large-scale impact it could have in streamlining access credit to one of the largest sectors of the Indian economy,” Prasad said.
He added: “This pilot program with just a couple of banks is a precursor to a larger implementation, and with the KCC being a key component of banks’ priority sector lending obligations, there is likely to be a larger implementation encompassing the full range of institutions that offer KCC products today, namely commercial banks, RRBs, small finance banks and cooperatives.”
The project was initiated by the CEO of the Reserve Bank of India, A Manimekhalai in Harda, in the presence of Rakesh Ranjan, Chief Product Manager of RBIH and more than 400 farmers in the district.