Rajasthan Farmers in a Fix After SBI Charges Extra Interest on Kisan Credit Card

After the 58 days of protesting, interest of approximately Rs 16,52,000 was reversed in 350 KCC accounts. However, thousands of farmers of Chhani Bari village in Hanumangarh district are still waiting to get back their hard-earned money.

Jaipur: In February this year, farmers of Chhani Bari village in Hanumangarh district of Rajasthan staged a protest in front of the local State Bank of India (SBI) branch against the extra interest charged on their Kisan Credit Card (KCC) loans.

After the 58 days of protesting, interest of approximately Rs 16,52,000 was reversed in 350 KCC accounts. However, thousands of farmers of this village are still waiting to get back their hard-earned money.

“There are 3,800 KCC accounts in SBI’s Chhani Bari branch and interest in almost every KCC account is charged additionally. The bank authorities thought that the villagers are illiterate so it is easy to fool them. If there was no truth in our protest, why would the banks reverse the interest,” Balwan Poonia, district president of the All India Kisan Sabha told The Wire.

Interestingly, the subvention meant to be given to the KCC holders was incorrect in hundreds of accounts in the same SBI branch and the farmers had to pay thousands of extra rupees.

“The list is very long. Rohtas, a farmer and KCC holder from Chhani Bari, was charged an extra interest of Rs 59,661, Phoola Ram got interest reverse of Rs 16,270 and Ram Swaroop Rs 30,766, but thousands of farmers are still fighting to get their money back,” Vinod Dhuva from Hanumangarh told The Wire.

Interest reverse entry of Rs. 16, 270 in Phoola Ram’s pass book. Credit: Shruti Jain

The bank authorities admitted that SBI made a mistake in the subvention. Speaking to The Wire, Subhash Gupta, the bank manager of the Chhani Bari branch, said, “There was some issue in the subvention amount in the KCC accounts but it has been rectified now.”

The Kisan Credit Card, which has been hailed by many as one of many innovative banking products designed by National Bank for Agriculture and Rural Development’s (NABARD) with the objective to enable farmers to meet their credit requirements from financial institutions in a timely and hassle-free manner, isn’t all that it has been touted to be – tough terms and conditions on card, from the formalities to credit limit to subvention, have made the agriculture loan non-viable.

Strict formalities pave way for moneylenders

Aware of the loan availability under KCC, many small and marginal farmers in Rajasthan still fall back to the local moneylenders due to the strict formalities attached with the scheme.

Nandkishore, a farmer of Sarna Chaur village in Rajasthan, has never approached any bank for KCC because of the formalities required to apply for the loan.

“There are a lot of problems with the loan under KCC. We need to submit jamabandi (land record) issued by the patwari, no-dues form from at least five banks, non-encumbrance certificate and land certificate which one can’t get without bribing the tehsildar. So, poor farmers like me seek loan from the moneylenders.”

Nandkishore doesn’t find any utility of loan under KCC. Credit: Shruti Jain

365 days validity of the interest subvention scheme

As per the NABARD’s interest subvention scheme, government of India provide interest subvention at 3% to those farmers who ‘promptly’ repay their short-term production credit up to a maximum amount of Rs 3 lakhs, within one year of disbursement of loan.

To repay the principal amount within a year and seek subsidy, the farmers often resort to the local moneylenders.

“With what we earn, we can only pay the interest amount. Paying the principal in one year is just beyond our capacity but we still pay the banks taking money from the moneylenders. Basically, nothing has changed for us even after so many years. The problem is neither the bank nor the moneylender, it is that we just don’t earn enough,” Mangilal (70), a KCC holder farmer from Kalwar.

Mangilal has never been able to pay back the principal amount of his KCC loan. Credit: Shruti Jain

At times, the banks on a risk, submit in records that the farmers have paid back the amount to receive the 2% subsidy meant for public sector banks, regional rural banks and cooperative banks and 3% to the farmers under the scheme.

“At many rural banks in Rajasthan, the managers shows the full credit of the principal amount even if the farmer hasn’t repaid the amount, just to seek the subvention benefit as the time limit is very short. This is a very risky condition for the banks but there is no other way the farmers can be helped out,” a manager from a rural bank said on the condition of anonymity.

Low credit limit

The rate of interest charged on KCC loans up to Rs 3 lakh by is fixed at 7%. Beyond this amount, the interest rate is decided by the banks which can go up to what is charged on other term loans meant for agriculture and allied activities.

Ratan feels there is no easy loan availability for other expenses of farmers. Credit: Shruti Jain

Within the Rs 3 lakh limit, credit to the farmer is given on the basis of the finance required for raising a crop per unit cultivated area decided by the District Level Technical Committee (DLTC) in each district. Hence, the land holding size of a farmer decides the credit he or she is allowed.

This limit may include non-production expenses, such as the operation and maintenance of machinery, but a subsidy isn’t given on such expenses.

“Subsidy is given only for production purposes, but there are other expenses too that a farmer has to look after and there is no facility to seek easy loans for them. So we often take loan for a daughter’s marriage in the name of production credit under the KCC. What else can we do?” said Ratan, a farmer from Kalwar.

“As the date of repayment expires in 365 days, the interest rate becomes 7% if the principal plus interest are within the limit of Rs 3 lakh and 11% if they cross the limit,” a worker at the State Bank of India told The Wire.

Stagnant subsidy rates

Despite Modi government’s much-talked promises to improve the condition of the farmers, subsidy rates under KCC have remained constant. Subvention available to banks is at a constant of 2% since 2011-12 and subvention to farmers increased from 1% to 3% in 2011-12 and is the same so far.

Even the restriction on the maximum limit under KCC has gone from non-existent to Rs 3 lakh under this government.

Screenshot of subsidy rates under KCC.