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3.22 In as many as 267 (37% of sample), the KCC limit was either renewed during
the last two years (so record was not available for earlier years) or the KCC loan
was sanctioned to the farmer for the first time by this bank branch. In all these
cases, no enhancement in KCC limit was observed even though the KCC was
sanctioned two years back. The analysis of bank statement of all the sample
farmers (714) indicated that the KCC limit was found to have been enhanced
every year only in 79 cases (11% sample) and the limit was enhanced only once
in another 114 cases (15% of the sample). In all other 521 cases (73% of sample),
no enhancement in credit limit was effected during the last three years.
3.23 The reasons for no enhancement of KCC limit of sample farmers as reported by
the Branch Managers as well as ascertained from the sample farmers and also
visible from the operations of their KCC loan accounts, the irregular repayment
performance of the borrower was the major reason for not enhancing the KCC
limit of the said borrowers. Non-willingness of both the bankers as well as the
farmers to go beyond the KCC limit of Rs. 1.0 lakh if it was close to this amount
as both the parties preferred to avoid ‘mortgage of land’ which is applicable for
loan above Rs. 1.0 lakh. Similarly, if loan amount contemplated was close to Rs.
3.0 lakh, both the farmers as well as bankers preferred to restrict it at Rs. 3.0
lakh since interest subvention is available for loan up to Rs. 3.0 lakh.
Provision of 10% of crop loan limit towards post-harvest / household /
consumption requirements + 20% of limit towards repairs and maintenance
expenses of farm assets + crop insurance, PAIS & asset insurance.
3.24 The revised guidelines on KCC has suggested to include the above two components
in the maximum permissible KCC limit. The practice was observed to be followed
by commercial banks and RRBs, to some extent but as an academic exercise
only, since in majority of the cases, the exercise of fixation of KCC limit was done
just to satisfy the norms laid down in the guidelines. For example, a comparison
of KCC limit arrived at by following the usual approach as mentioned in the
guidelines (the desired limit) and the actual KCC limit fixed in case of sample
farmers in Punjab indicated that there were only 5 out of 120 cases where both
the figures were almost same (difference of within Rs. 5000). In other 76 cases,
the actual KCC limit fixed was less than the desired limit and in the rest 39 cases,
the actual limit fixed was higher than desired KCC limit. In other states too, the
observations were on the similar lines. The reasons for the same as gathered
from bankers and the borrowers are as under:
(i) In quite a good number of cases, there was already a consensus between the
Branch Manager and the farmer on the amount of KCC limit to be fixed for
the said farmer and normally the same amount was being specified by the
farmer on the KCC application form. Sometimes the farmers themselves
did not want a higher limit than the amount specified by him and in other
cases, it was the branch managers who informally conveyed to the borrower
about their unwillingness to fix the KCC limit beyond a certain amount.
The same was observed from the application cum appraisal forms where it
