Instrument to Reduce Transaction Cost in Rural Lending - PowerPoint PPT Presentation

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Instrument to Reduce Transaction Cost in Rural Lending

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... Allahabad Bank, PNB All borrowers for tractor loan Punjab & Sindh Bank Owner cultivators only Aligarh RRB Features of Kissan Credit Card 2. – PowerPoint PPT presentation

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Title: Instrument to Reduce Transaction Cost in Rural Lending


1
Instrument to Reduce Transaction Cost in Rural
Lending
  • Kissan Credit Cards
  • - reduce the transaction cost of the borrowers
    and lenders
  • - flexibility and convenience to the farmers in
    borrowing

2
Features of Kissan Credit Card
  • 1. Eligibility of farmers
  • existing borrowers having good track record for
    the last 2-3 years
  • existing and new borrowers (All farmers with
    requirement of production credit Rs. 5000 and
    above) Syndicate Bank
  • farmers having one acre of irrigated land
    Allahabad Bank, PNB
  • All borrowers for tractor loan Punjab Sindh
    Bank
  • Owner cultivators only Aligarh RRB

3
Features of Kissan Credit Card
  • 2. Minimum credit limit
  • - Rs. 3000 to 5000
  • 3. Maximum credit limit
  • - no maximum limit
  • - slabs according to size of holdings (Allahabad
    Bank PNB)

4
Features of Kissan Credit Card
Allahabad Bank Punjab National Bank
1 1-2 acre, Rs. 25000 1-2 acre, 30,000
2 2.5-7 acres, Rs. 40,000 2.5-6 acres, Rs. 2 lakh
3 7-9 acres, Rs. 60,000 6-8 acres, Rs. 3 lakh
4 More than 9 acres, Rs. 1 lakh More than 8 acres, Rs. 3 lakh and above
5
Features of Kissan Credit Card
  • 4. Basis for fixation of credit limit
  • - operational land holding, cropping pattern and
    scale of finance for each crop
  • - 50 of the total income of the family from
    all sources Allahabad Bank and PNB

6
Features of Kissan Credit Card
  • 6. Fixation of seasonal limit
  • - no seasonal limit, entire limit sanctioned can
    be operated throughout the year.
  • - seasonal limit based on nature of crop
  • - seasonal limit if total credit limit is above
    25000
  • - seasonal limit expires if not used
  • - month-wise limit depending upon cash flow
    (Bank of India)

7
Features of Kissan Credit Card
  • 7. Separate limit for Non-farm activities or
    allied activities
  • - 10 to 30 of crop credit limit as additional
    credit for allied activities
  • - additional fixed amount per activity
  • - actual requirement and sanction separately
  • - Clubbed in crop credit limit
  • - some percentage of crop credit limit as
    consumption loan (contingency)

8
Features of Kissan Credit Card
  • 8. Facility of drawl at other branches
  • - only card issuing branch
  • - all branches
  • - identified branches within the district
  • - only literate borrowers can avail this
    facility
  • - charge service charges for this facility
  • - 2-3 per cent of cash withdrawn as service
    charge

9
Features of Kissan Credit Card
  • 9. Repayment
  • - specific repayment norms
  • - fixing sub-limit (separately for rabi and
    kharif)
  • - operation on next sub-limit is possible when
    repayment for previous sub-limit are made.

10
Features of Kissan Credit Card
  • 10. Insurance of the card holder
  • - in few cases (Andhra Bank, Allahabad Bank and
    Vijaya Bank), Rs. 1 lakh
  • - premium to be born by card holder
  • - premium for small and marginal farmers is
    shared between card holder and bank

11
Features of Kissan Credit Card
  • 11. Issue of cheque book
  • - yes but only to literate borrowers
  • - yes but given only to existing borrowers with
    good track record
  • - no, withdrawal only through debit slip at the
    card issuing branch only

12
Features of Kissan Credit Card
  • 12. Service charges
  • - exempted small borrowers (Canara bank, UCO
    bank)
  • - 100 as admission fee/membership fee
  • - Rs. 200 as fee for duplicate card

13
Features of Kissan Credit Card
  • 13. Opening of Saving Bank Account
  • Except Syndicate bank, none of the other
    commercial banks have made it compulsory for
    borrower to open a saving bank account with the
    bank branch to avail the kissan card facility

14
Features of Kissan Credit Card
  • 14. Payment of interest on credit balance
  • - No interest in most of the cases
  • - Few banks prescribe certain minimum credit
    balance (Rs. 500) for paying the interest _at_ 4
    percent p.a.
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