Summary of this article
RBI standardises crop season timelines under revised KCC rules.
Collateral-free agricultural loans remain available up to Rs 2 lakh.
New KCC directions will take effect from January 2027.
The Reserve Bank of India (RBI) has issued updated guidelines for the Kisan Credit Card (KCC) scheme with the aim of aligning the definition of crop seasons to create uniformity in the loan sanctioning and repayment process of banks. The new regulations will come into effect from January 1, 2027.
According to the RBI, the revised framework aims to ensure adequate and timely credit support through the banking system for farmers and borrowers engaged in agriculture and allied activities. The scheme is designed to meet both working capital and investment credit needs through a composite credit facility with simple and standard procedures.
Crop Season Definition Standardised
One of the key changes in the revised directions is the standardisation of crop seasons for KCC loans. The RBI said the definition has been aligned with the Income Recognition and Asset Classification (IRAC) norms.
Under the new framework, crop seasons will be treated as 12 months for short-duration crops and 18 months for long-duration crops.
RBI defines a crop season as the period between the raising of a crop and its harvesting and marketing. The standardised timelines are expected to bring consistency in loan repayment schedules and asset classification practices across lenders.
Feedback On Draft Directions
The RBI had released draft directions on the revised KCC scheme in February this year and invited comments from stakeholders and the public.
After reviewing the feedback, the RBI decided against increasing the collateral-free loan limit under the scheme. It noted that the limit had already been raised in December 2024 and that no further increase is planned at present.
Collateral Rules Clarified
The revised directions state that banks should waive collateral security and margin requirements for agricultural loans, including loans for allied activities, up to Rs 2 lakh per borrower.
The RBI also clarified that if a borrower voluntarily pledges gold or silver as collateral for an agricultural loan within the collateral-free limit, it will not be treated as a violation of the collateral-free lending guidelines applicable to the agriculture sector.
For loans above Rs 2 lakh, banks will continue to determine collateral security and margin requirements according to their internal credit policies and existing RBI guidelines.
Relief For Certain KCC Loans
The directions provide additional flexibility for KCC loans backed by hypothecation of crops or stock and linked to tie-up arrangements for loan recovery. In such cases, banks may waive collateral security requirements for loans up to Rs 3 lakh.
The RBI said that banks should periodically review and renew short-term credit limits for crop cultivation and allied activities in line with their credit policies.
The revised directions are intended to create a more uniform framework for KCC lending while maintaining flexibility for banks in managing agricultural credit. The KCC scheme remains one of the primary channels through which farmers access institutional credit for cultivation and related activities.
