RBI Proposes Major Overhaul of Kisan Credit Card Scheme: 5 Key Reforms Explained

India’s central banking authority, the Reserve Bank of India, has issued fresh draft guidelines proposing substantial revisions to the Kisan Credit Card (KCC) scheme. The objective of these proposed changes is to simplify the current system, improve farmers’ access to institutional credit, and ensure agricultural financing reflects modern farming realities.

The draft framework aims to establish a single, transparent structure that covers both agriculture and allied activities. Once implemented, the new norms will apply uniformly to commercial banks, small finance banks, regional rural banks, and rural cooperative banks across India.

The Reserve Bank of India has also invited stakeholders and members of the public to share their feedback on the draft guidelines until March 6, 2026, after which the final rules will be notified.

Why the RBI Is Updating KCC Rules

For years, the Kisan Credit Card scheme has played a crucial role in supporting farm credit in India. However, changing agricultural practices, rising input costs, and the growing use of technology in farming have created the need for a more updated and flexible framework.

Through these revisions, the RBI intends to:

• Strengthen the flow of credit to farmers

• Synchronise repayment schedules with crop production cycles

• Broaden the scope to include allied and technology-oriented farming activities

• Simplify operational procedures for banks

5 Key Changes Proposed in the KCC Framework

1. A Single, Clearer Framework for KCC Loans

Simplifying Agricultural Lending

The draft proposes integrating agricultural and allied lending guidelines under one comprehensive framework. The goal is to make the KCC system easier to administer and expand its outreach. The revised directions will cover commercial banks, small finance banks, regional rural banks, and rural co-operative banks.

By replacing multiple fragmented instructions with a consolidated structure, the RBI seeks to improve clarity, efficiency, and consistency in agricultural lending practices.

2. Standard Crop Seasons for Uniform Repayments

Harmonised Loan Cycles

To address inconsistencies in repayment schedules, the RBI has suggested standardising crop seasons nationwide. Short-duration crops would follow a 12-month cycle, while long-duration crops would be structured around an 18-month cycle. This approach is intended to create uniform loan sanctioning and repayment timelines.

At present, varying regional crop definitions often lead to confusion in repayment schedules. A standardised system is expected to bring greater predictability for both farmers and lending institutions.

3. Longer Loan Tenure of Up to Six Years

Better Alignment with Farm Income

A significant proposal in the draft is extending the maximum tenure of KCC loans to six years. This change is particularly beneficial for farmers cultivating crops that require longer growing periods, as repayment schedules can be better aligned with actual income generation.

The extended tenure could ease financial pressure on farmers engaged in plantation farming, horticulture, and other long-gestation agricultural activities.

4. Credit Limits Linked to Real Cultivation Costs

More Accurate Financing

Under the revised framework, the permissible drawing limit will be linked to the officially approved scale of finance for each crop season. In practical terms, this means that credit allocation would more closely reflect the actual cost of cultivation, reducing the risk of inadequate funding.

Given the steady rise in expenses such as seeds, fertilisers, labour, irrigation, and fuel, this measure aims to ensure farmers receive sufficient working capital to sustain production.

5. Wider Coverage for Modern Farming Expenses

Supporting Technology-Driven Agriculture

The draft also broadens the scope of permissible expenses under the KCC scheme. Costs related to soil testing, access to real-time weather information, and certification for organic or good agricultural practices will be included within the additional 20% allocation meant for farm asset maintenance.

This expansion reflects India’s growing emphasis on sustainable agriculture, digital farming solutions, and climate-resilient cultivation methods.

Public Consultation and Next Steps

The central bank has made the draft guidelines available for public consultation until March 6, 2026, through its official website and designated email channels. After reviewing feedback from stakeholders, the RBI will finalise and issue the updated regulations.

Experts suggest that these reforms could streamline rural credit systems and address several operational bottlenecks in agricultural lending.

Broader Impact on Farmers and Banks

If implemented as proposed, the revised KCC framework could:

• Expand credit access in rural and semi-urban areas

• Improve farmers’ cash flow management

• Lower instances of loan restructuring

• Promote adoption of modern and sustainable farming techniques

• Enhance financial inclusion within the agricultural sector

Banks, on the other hand, may benefit from clearer regulatory guidelines and improved risk management standards.

Conclusion

The draft reforms introduced by the Reserve Bank of India represent a significant effort to modernise India’s agricultural credit structure. By introducing a unified regulatory framework, standardising crop cycles, extending loan tenure to six years, aligning credit limits with actual cultivation costs, and expanding coverage to include modern farming needs, the proposed KCC changes aim to make farm financing more responsive and future-oriented.

If effectively implemented, these measures could strengthen farmers’ financial resilience while supporting India’s broader goal of sustainable and technology-enabled agricultural growth.