Mumbai: The Reserve Bank Tuesday relaxed the repayment norms for Kisan Credit Cards (KCC) to help farmers tide over the difficult financial situation due to deficient monsoon.
While modifying the KCC guidelines, RBI has removed the clause pertaining to mandatory repayment of loans by card holders within a year and gave freedom to banks to fix the repayment period. The decision will benefit over 10 crore KCC holders.
"The repayment period may be fixed by banks as per the anticipated harvesting and marketing period for the crops for which a loan has been granted," the RBI notification said.
RBI's notification on KCC norms was issued a day after Finance Minister P Chidambaram expressed concern over the deficient monsoon and its impact on rural areas.
The notification further said that KCC could be also be used for making mandatory crop insurance, a facility which was not available earlier.
The KCC card holders, it added, will continue to have the option to withdraw money from ATMs and get benefits of Asset Insurance, Personal Accident Insurance Scheme and Health Insurance.
Chidambaram yesterday had said, "The South-West monsoon has been below expectation. Drought-like conditions have been reported from several states.
"It is the duty of the government to provide relief to the people living in drought affected districts, protect wage employment and save agticultural production to the extend possible".
He had also said that contingency plans were being put in place to help farmers replant alternate crops as well as supply drinking water and fodder.
Meanwhile, RBI Deputy Governor K C Chakrabarty told reporters in New Delhi that Indian lenders are resilient enough to weather the pressure on farm loans caused by drought like situation because of deficient monsoon.
"Whenever there is drought, there is a pressure (on farm loans). But we have sufficient rehabilitation measures so that banks can weather it out," he said.
Monsoon is the life-line of the agriculture sector as only 40 percent of the cultivable area is irrigated. Rain has been 20 percent lower during June-July, affecting kharif (summer) crops mainly coarse cereals and pulses.
Karnataka, Gujarat, Maharashtra and Rajasthan are facing drought-like situation.
Last week, Empowered Group of Ministers (EGoM) on drought had approved diesel subsidy of 50 percent to farmers for saving standing crops, and a Rs 2,000 crore package for states affected by drought-like situation.
The government had launched KCC Scheme in 1998-99 with a view to providing adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner.