Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes? 1. Working capital for maintenance of farm assets 2. Purchase of combine harvesters, tractors and mini trucks. 3. Consumption requirements of farm households 4. Post-harvest expense 5. Construction of family house and setting up of village cold storage facility. Select the correct answer using the code given below:
Contents9
- A1, 2 and 5 only
- B1, 3 and 4 only
- C2, 3, 4 and 5 only
- D1, 2, 3 4 and 5
Show answer
Answer: (B) 1, 3 and 4 only
Kisan Credit Card (KCC) is NOT a credit card — it's like an overdraft facility for farmers.
Let's check what purposes it covers:
Statement 1 (Working capital for farm asset maintenance) — CORRECT: KCC covers working capital needs for maintaining farm assets and allied activities like dairy animals, inland fisheries, etc.
Statement 2 (Purchase of combine harvesters) — NOT CORRECT: KCC doesn't cover purchase of heavy machinery like combine harvesters. This would fall under separate agricultural term loans.
Statement 3 (Consumption needs of farmer household) — CORRECT: KCC covers consumption requirements of the farmer household — meaning personal and family expenses, not just farming costs.
Statement 4 (Post-harvest expenses and produce marketing) — CORRECT: KCC specifically covers post-harvest expenses and produce marketing loans, helping farmers until they sell their crops.
Statement 5 (Construction of farm houses) — NOT CORRECT: KCC doesn't cover construction of farm houses. It's meant for short-term credit needs, not long-term construction.
Answer: B (1, 3 and 4 only).
Key Takeaway: KCC covers:
- cultivation costs
- post-harvest expenses
- marketing
- farm asset maintenance
- household consumption.
Does NOT cover:
- buying heavy machinery
- building farm houses.
It's short-term credit, not long-term investment.
Kisan Credit Card provides flexible short-term credit covering both farming expenses and household consumption needs of farmers, making it different from regular agricultural loans.
The scheme was significantly expanded and digitized around 2018-2020 with targets to issue crores of new cards, making it a current policy focus.
The question tests whether students can distinguish between short-term credit purposes (covered by KCC) versus long-term investment needs (requiring separate term loans).
Kisan Credit Card Scheme
Indian Economy Kisan Credit Card short-term credit support
Kisan Credit Card: Coverage, Limits & UPSC Distinctions
KCC is an overdraft facility for farmers, not a regular credit card
Covers cultivation + post-harvest + household consumption but NOT heavy machinery purchase
Credit limit up to ₹3 lakh without collateral, higher amounts need security
Issued by commercial banks, RRBs, and cooperative banks
What is KCC
Kisan Credit Card is not a credit card but an overdraft facility that allows farmers to withdraw money as needed up to a sanctioned limit. Launched in 1998-99, it provides flexible short-term credit for farming and related activities.
KCC Coverage: What's Included vs Excluded
Purpose | Covered? | Details |
|---|---|---|
Cultivation expenses | ✓ YES | Seeds, fertilizers, pesticides, labor costs |
Farm asset maintenance | ✓ YES | Repair of tractors, pump sets, irrigation equipment |
Post-harvest expenses | ✓ YES | Storage, transportation, marketing of produce |
Household consumption | ✓ YES | Family expenses, medical bills, education costs |
Purchase of heavy machinery | ✗ NO | Combine harvesters, tractors - need separate term loans |
Construction activities | ✗ NO | Farm houses, cold storage - need investment credit |
Key Features
Single window facility: One card for multiple banking services including ATM withdrawals
Flexible repayment: Can be repaid and reused multiple times within the validity period
Interest subsidy: 2% interest subvention provided by government to reduce farmer burden
Crop insurance linkage: Mandatory PMFBY coverage for loan amounts above ₹5,000
Validity period: 5 years for crop loans, renewable based on performance
Question Anchoring
This PYQ tested the specific scope of KCC short-term credit. The trap was including heavy machinery purchase and construction - these require long-term investment loans, not KCC's short-term overdraft facility.
Trap: KCC covers machinery purchase - Wrong! Only maintenance, not buying new heavy equipment
Trap: KCC is only for cultivation - Wrong! Also covers household consumption needs
Trap: KCC covers farm construction - Wrong! Short-term facility doesn't fund buildings
Common confusion: KCC vs Agricultural Term Loans - KCC is short-term overdraft, term loans for long-term investments
Agricultural Credit System in India
Indian Economy
India's Agricultural Credit Architecture & Key Schemes
NABARD is the apex institution for agricultural and rural credit policy
Three-tier cooperative structure: State, District, and Primary Agricultural Credit Societies
18% priority sector lending target for agriculture in domestic commercial banks
Agricultural Credit Institutions
# Agricultural Credit System
## Cooperative Banks
- State Cooperative Banks
- District Central Cooperative Banks
- Primary Agricultural Credit Societies (PACS)
## Commercial Banks
- Public Sector Banks
- Private Banks
- Small Finance Banks
## Regional Rural Banks
- Sponsored by Commercial Banks
- 43 RRBs currently operating
## NABARD
- Policy maker
- Refinance provider
- Supervisor of cooperativesTypes of Agricultural Credit
Credit Type | Purpose | Tenure | Examples |
|---|---|---|---|
Short-term | Crop production, working capital | Up to 15 months | KCC, Crop loans |
Medium-term | Farm mechanization, minor irrigation | 15 months to 5 years | Tractor loans, Pump set loans |
Long-term | Land development, major irrigation | 5-20 years | Land purchase, Well digging |
Investment credit | Farm infrastructure | 5-15 years | Warehouse, Cold storage |
Recent Initiatives
PM-KISAN: Direct income support of ₹6,000 per year to farmer families
Interest Subvention Scheme: 2% interest relief on crop loans up to ₹3 lakh
Pradhan Mantri Fasal Bima Yojana: Crop insurance with 2% premium for Kharif, 1.5% for Rabi
e-NAM platform: Online trading to help farmers get better prices for produce
Trap: All agricultural credit comes from cooperatives - Wrong! Commercial banks now provide majority share
Confusion: NABARD vs RBI roles - NABARD handles rural credit policy, RBI sets overall monetary policy