The Reserve Bank of India issued the revised Kisan Credit Card (KCC) Directions on 19 June 2026, retaining the collateral-free loan limit of Rs 2 lakh per borrower for agriculture and allied activities. The directions also clarified that voluntary pledges of gold and silver as collateral within this limit will not breach the collateral-free lending guidelines. The new framework, which standardises crop seasons and extends the KCC tenure to six years, will take effect from 1 January 2027.
What the Revised KCC Directions Say
The Reserve Bank of India issued the Reserve Bank of India [Commercial Banks Kisan Credit Card (KCC) Scheme] Directions, 2026 in exercise of its powers under Section 21 and Section 35A of the Banking Regulation Act, 1949. Separate but parallel directions have been issued for Small Finance Banks, Regional Rural Banks, and Rural Cooperative Banks. The directions consolidate and replace all previous circulars on the KCC scheme, creating a unified regulatory framework.
The directions apply to all new KCC loans sanctioned from 1 January 2027. Loans sanctioned before this date will continue to be governed by the earlier guidelines until their maturity or next renewal.
Collateral-Free and Margin-Free Loans
Banks must waive collateral security and margin requirements for agricultural loans, including loans for allied activities, up to Rs 2 lakh per borrower. This is not a new limit. The RBI had already raised the collateral-free threshold from Rs 1.6 lakh to Rs 2 lakh in December 2024. The revised directions simply incorporate this limit into the consolidated framework.
For loans above Rs 2 lakh, banks remain free to decide collateral and margin requirements based on their internal credit policies and existing RBI guidelines.
Clarification on Voluntary Gold and Silver Pledges
The directions address a practical concern that had caused confusion among bankers and farmers. If a borrower voluntarily offers gold or silver as collateral for an agricultural loan within the Rs 2 lakh collateral-free limit, it will not be treated as a violation of the collateral-free lending guidelines. Banks must, however, obtain and retain an explicit written declaration from the borrower confirming that the pledge was made voluntarily.
Importantly, the RBI clarified that its collateral-free guidelines apply only to secondary collateral, not to the primary security or the assets being financed through the loan. This means banks can still hold primary security over crops, livestock, machinery, or other financed assets.
Standardised Crop Seasons
A major structural change in the revised directions is the standardisation of crop seasons. For the purpose of the KCC scheme, crop seasons have been aligned with the RBI’s Income Recognition and Asset Classification (IRAC) norms. Short-duration crops now have a standardised crop season of 12 months, while long-duration crops have a season of 18 months. A crop season covers the entire period from sowing to harvesting and marketing. This uniformity is expected to bring consistency in loan sanctioning, repayment scheduling, and asset classification across all banks.
Longer Tenure and Flexi KCC
The KCC facility will now have a composite tenure of six years, up from the earlier five-year period. For marginal farmers, a Flexi KCC facility with a flexible credit limit of Rs 10,000 to Rs 50,000 will be available based on the bank’s assessment, without being linked to the value of land.
The Kisan Credit Card Scheme: A Primer
The Kisan Credit Card scheme is the backbone of India’s institutional agricultural credit system. It was introduced in 1998 on the recommendations of the R.V. Gupta Committee, with the National Bank for Agriculture and Rural Development (NABARD) tasked with preparing a model scheme for uniform adoption by banks. NABARD, established in 1982 under the NABARD Act, 1981, is headquartered in Mumbai and serves as the apex development bank for agriculture and rural development.
Evolution of the Scheme
The KCC scheme has undergone significant expansion since its launch. Initially focused only on short-term crop production loans, it was extended in 2004 to cover term loans for agriculture and allied activities. In 2012, a working group under T. M. Bhasin recommended further simplifications, including the issuance of electronic KCCs. The scheme was comprehensively revised in 2020, introducing RuPay-enabled KCC debit cards, one-time documentation, annual built-in cost escalation in credit limits, and free drawals within the sanctioned limit.
The Modified Interest Subvention Scheme (MISS), launched in 2006-07 as a Central Sector Scheme by the Ministry of Agriculture and Farmers Welfare, works alongside the KCC framework. It ensures that short-term crop loans up to Rs 3 lakh are available at an interest rate of 7%, with an additional 3% subvention for farmers who repay on time, bringing the effective rate down to 4%.
Who Is Covered and What Is Covered
The KCC scheme covers a wide range of borrowers: owner cultivators, tenant farmers, oral lessees, sharecroppers, Self Help Groups (SHGs), and Joint Liability Groups (JLGs). A simplified one-page application form pre-filled from PM-KISAN records has made the application process easier.
The credit facility under KCC covers multiple purposes:
| Purpose | Details |
|---|---|
| Crop cultivation | Seeds, fertilisers, pesticides, labour, and other farming inputs |
| Allied activities | Dairy, fisheries, animal husbandry, poultry, sericulture, beekeeping |
| Post-harvest expenses | Warehouse storage, produce marketing |
| Household consumption | Family consumption needs of the farmer |
| Insurance | Crop insurance, accident insurance, health insurance, asset insurance premiums |
| Investment credit | Land development, minor irrigation, farm equipment, allied activity investments |
| Technology services | Soil testing, weather advisory, organic farming certification |
How the Credit Limit Is Calculated
The credit limit under KCC is determined using the Scale of Finance (SoF) approved by the District Level Technical Committee (DLTC) or the State Level Technical Committee (SLTC) . The SoF per hectare for each crop is multiplied by the area cultivated to arrive at the base limit. To this, 10% is added for household and post-harvest consumption needs, and another 20% for maintenance and repairs of farm assets. Insurance premiums are also included.
The Maximum Permissible Limit (MPL) for short-term crop loans is calculated on a notional basis by adding 10% to the previous season’s limit from the second crop season onwards. The limit for the sixth year, combined with the estimated long-term credit requirement, forms the Composite Maximum Permissible Limit (CMPL) , which becomes the overall KCC credit limit for the farmer.
Why These Changes Matter
The revised KCC directions come at a time when India has over 7.72 crore active KCC accounts with credit outstanding of more than Rs 10.2 lakh crore, making it one of the largest agricultural credit programmes in the world. Small and marginal farmers, who own less than two hectares of land, account for over 86% of all farming households in India. For this group, collateral requirements have historically been a major barrier to accessing formal credit.
By retaining the Rs 2 lakh collateral-free limit and clarifying the rules on voluntary gold and silver pledges, the RBI has removed a significant compliance ambiguity that banks faced. Earlier, some banks hesitated to accept gold or silver from small borrowers even when offered voluntarily, fearing that it would violate collateral-free lending norms. The clarification that this pertains only to secondary collateral gives banks the confidence to accept voluntary pledges while still honouring the spirit of collateral-free lending.
The standardisation of crop seasons addresses a long-standing inconsistency. Different banks had been applying different definitions of crop seasons, leading to divergent repayment schedules and asset classification for the same crop in the same region. The alignment with IRAC norms will bring uniformity and reduce disputes over loan classification.
The extension of the KCC tenure from five to six years and the introduction of Flexi KCC for marginal farmers also expand access to institutional credit for those who need it most. Together, these changes are expected to increase the flow of formal credit to agriculture, reduce dependence on informal moneylenders, and support the government’s goal of doubling farmer incomes.
Key Takeaways
- The RBI issued revised Kisan Credit Card (KCC) Directions on 19 June 2026, effective from 1 January 2027.
- Banks must waive collateral and margin requirements for agricultural and allied activity loans up to Rs 2 lakh per borrower.
- Voluntary pledges of gold and silver as collateral within the Rs 2 lakh limit will not be treated as a violation of collateral-free lending rules. Banks must obtain explicit declarations from borrowers.
- The directions standardise crop seasons at 12 months for short-duration crops and 18 months for long-duration crops, aligning with IRAC norms.
- The KCC composite tenure has been extended to six years, and a Flexi KCC facility of Rs 10,000 to Rs 50,000 has been introduced for marginal farmers.
- The KCC scheme was introduced in 1998 on the recommendations of the R.V. Gupta Committee, with NABARD preparing the model scheme. Over 7.72 crore KCC accounts are currently operational with over Rs 10.2 lakh crore in credit outstanding.
