Kisan Credit Card rules revised: RBI standardises crop season norms, retains collateral-free loan limit

The Reserve Bank of India (RBI) on Friday revised the Kisan Credit Card (KCC) framework, standardising the definition of crop seasons and aligning it with banking asset-classification norms in a move aimed at bringing greater uniformity in farm loan sanctioning and repayment schedules.The revised directions, which will come into effect from January 2027, seek to streamline the delivery of credit to farmers and borrowers engaged in agriculture and allied activities through a simplified and standardised framework, reported PTI.RBI said the new directions are intended to ensure “adequate and timely credit support from the banking system under the KCC Scheme to meet the working capital and investment credit needs of borrowers engaged in agriculture and allied activities, through a composite facility that requires simple and standard procedures”.A key change relates to the definition of crop seasons, which has been modified to align with Income Recognition and Asset Classification (IRAC) norms.“For the purpose of the KCC Scheme, crop seasons shall be standardised at twelve months for short duration crops and eighteen months for long duration crops,” the central bank said.Crop season refers to the period from cultivation of crops to their harvesting and marketing.The revised framework follows public consultations on draft directions issued by the RBI in February this year.On collateral requirements, the central bank declined suggestions seeking a higher collateral-free lending threshold, noting that the limit was revised only recently in December 2024.Under the new directions, banks will continue to waive collateral security and margin requirements for agricultural loans, including those extended for allied activities, up to Rs 2 lakh per borrower.“However, voluntary pledge of gold and silver as collateral for agriculture loans up to the collateral-free limit will not be considered as a violation of the guidelines on collateral-free lending to the agriculture sector,” RBI said.For loans above Rs 2 lakh, banks will determine collateral and margin requirements in accordance with their credit policies and RBI guidelines.The central bank also provided additional flexibility for KCC loans backed by hypothecation of crops or stock and involving recovery tie-up arrangements. In such cases, banks may waive collateral security requirements for loans up to Rs 3 lakh.RBI further directed banks to undertake periodic review and renewal of short-term credit limits for crop cultivation and allied activities in line with their internal credit policies.The Kisan Credit Card scheme remains the primary institutional credit mechanism for farmers, providing working capital and investment support for crop cultivation, dairy, fisheries and other allied agricultural activities.