In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced a significant enhancement in the Kisan Credit Card (KCC) loan limit, increasing it from ₹3 lakh to ₹5 lakh. This move is aimed at strengthening financial support for farmers, helping them invest more in agricultural activities and allied sectors.
Key Highlights of the KCC Limit Increase:
- Expanded Credit Access: With the loan limit now raised to ₹5 lakh, farmers can secure higher funds at subsidized interest rates, facilitating investment in modern equipment, quality seeds, fertilizers, and improved irrigation.
- Interest Rate Benefits: The government continues to provide a 2% interest subsidy on KCC loans, along with an additional 3% discount for timely repayments, effectively lowering the interest rate to 4% per annum.
- Broader Coverage: Since 2018-19, KCC has been extended beyond crop cultivation to include fisheries and animal husbandry, ensuring comprehensive rural financial inclusion. As of March 2024, 1.24 lakh KCCs had been issued for fisheries and 44.40 lakh for animal husbandry.
Impact on Farmers and the Rural Economy:
- Boost in Agricultural Productivity: Higher credit availability will enable farmers to adopt advanced techniques, leading to improved yields and profitability.
- Reduced Dependence on Informal Borrowing: The Economic Survey highlights a decline in non-institutional borrowing from 90% in 1950 to around 25% in FY22, showcasing KCC’s role in providing reliable credit access.
- Strengthening Rural Livelihoods: Increased formal credit support will stimulate rural economic growth, improving financial security for small and marginal farmers.
According to the latest Economic Survey, as of March 2024, there were 7.75 crore active KCC accounts with a total outstanding loan of ₹9.81 lakh crore. The KCC scheme, originally designed to meet short-term working capital needs, has played a crucial role in reducing dependence on high-interest informal loans. Additionally, the collateral-free loan limit has been raised to ₹1.6 lakh, further easing access for small and marginal farmers.
With this strategic expansion of the KCC loan limit, Budget 2025 reinforces the government’s commitment to empowering India’s agricultural sector, ensuring financial security, and driving sustainable growth in rural areas.
