Evaluating the Kisan Credit Scheme: Results from Bihar and India

Policy brief State

  • The Government of India introduced the Kisan Credit Card (KCC) scheme in its 1998-99 budget to provide timely, short-term agricultural credit to farmers through the banks under a single window system. By March 2011, more than 100 million KCC accounts had been issued nationwide.
  • This brief outlines results from a study examining the impact of the KCC Scheme on economic growth and agricultural productivity at the state and district level from 2005-06 to 2009-10. The analysis included all districts in Bihar.
  • The findings show the KCC scheme had no impact on agricultural credit and economic growth both at the state and district level. However, states with better access to credit initially had greater amount of KCC lending subsequently. Commercial banks were found to be the largest source of credit under the KCC scheme at the state level.
  • While Bihar shows higher adoption rates for KCC lending than other states, issues like multiple account holdings, chances of high default rates due to low interest rates, and lack of collateral are risks for banks.
  • Proper regulation could make the KCC scheme more effective through initiatives like linking accounts with the Aadhaar card to reduce multiple accounts and digitising land records. Banks should also capture accurate information on land ownership, irrigation, types of crops, and cropping patterns before providing loans under this scheme.
  • Further research is needed to understand whether this scheme has actually reduced transaction costs for banks and their default rates.