RBI launches a pilot scheme to digitise the KCC with the goal of transforming rural credit delivery

According to a statement from the RBI, it is intended to progressively spread the digitalization of KCC lending to additional districts in these two states and across the nation based on the lessons learned from the trial.

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To change the way rural credit is delivered, the Reserve Bank of India has chosen to start pilot programmes in Madhya Pradesh and Tamil Nadu to digitise Kisan Credit Cards (KCC).

According to a statement from the RBI, it is intended to progressively spread the digitalization of KCC lending to additional districts in these two states and across the nation based on the lessons learned from the trial.

The proposed digitalization of the KCC lending process will make it more efficient, lower costs for borrowers, and drastically shorten turn around time (TAT), according to the statement. The pilot project would involve automating various processes within banks and integrating their systems with the service providers.

The TAT, which ranges from two to four weeks, from loan application to disbursement has also been quite long.

Rural finance is intimately linked to inclusive economic growth since it supports small enterprises, ancillary industries, agriculture, and other associated industries.

Currently, it claimed, the procedure for obtaining such financing necessitates that the consumer go in person to a bank branch with documentation proving their ownership of the land. The customer may occasionally need to make repeated trips to the bank branch.

The digitalization of many parts of rural finance is a key goal of the RBI’s Fintech activities, it stated, taking into account the difficulties rural finance faces in India.

The Reserve Bank Innovation Hub (RBIH) in collaboration with the RBI is undertaking a pilot project for the end-to-end digitalization of Kisan Credit Card (KCC) financing as part of this effort, according to the statement.

According to the statement, the pilot would start in September 2022 in a few districts of Madhya Pradesh and Tamil Nadu with the active assistance of the respective State governments and partner banks Union Bank of India and Federal Bank, respectively.

“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.

In order for farmers to easily buy agricultural inputs like seeds, fertiliser, insecticides, etc. and withdraw cash for their production needs, the KCC scheme was created in 1998 for the purpose of issuing farm loans to farmers based on their holdings for uniform acceptance by the banks.

In 2004, the scheme was further expanded to cover farmers’ needs for investment loans in allied and non-farm enterprises.

After that, in December 2020, Prime Minister Narendra Modi introduced the Revised Scheme to Kisan Credit Card (KCC), with the intention of giving farmers access to sufficient and timely credit support from the banking sector through a single window for their agricultural needs.