MUMBAI : The Reserve Bank of India (RBI) on Friday said it would take up a pilot project for end-to-end digitization of Kisan Credit Card (KCC) lending, developed by the central bank and its subsidiary Reserve Bank Innovation Hub (RBIH), aiming to accelerate loan turnaround times.
Commencing in September, the project would entail automation of various processes within banks and integration of their systems with the service providers. The proposed digitization aims to make it more efficient and reduce costs for borrowers.
“This pilot project on digitization of KCC lending is expected to play a pivotal role in facilitating credit flow to the unserved and underserved rural population by making the credit process faster and more efficient. When fully implemented, this has the potential to transform the rural credit delivery system of the country,” it said.
The Kisan Credit Card (KCC) scheme was introduced in 1998 to issue such cards to farmers based on their land holdings for uniform adoption by the banks. While farmers were initially allowed to use them to readily purchase agriculture inputs such as seeds, fertilizers, pesticides, and draw cash for their production needs, the scheme has since been revised.
Rural finance encompasses a range of financial services offered to rural customers, including farmers, at all income levels, RBI said on Friday. It added that in a country like India, rural credit is closely related to inclusive economic growth, as it caters to the requirements of agriculture and allied activities, ancillary industries and small businesses.
“At present, the process for getting such finance requires a customer to visit a bank branch in-person along with the proof of land ownership and other documents. Sometimes, the customer may be required to visit the bank branch multiple times,” it said, adding that the turnaround time from loan application to disbursement has also been rather high, ranging from two to four weeks.
The regulator said that considering the challenges associated with rural finance in India, digitization of various aspects of rural finance is an important objective of its fintech initiatives.
The project, RBI said, would start in select districts of Madhya Pradesh and Tamil Nadu with Union Bank of India and Federal Bank, respectively, as partner banks and with active cooperation of the respective state governments.
“Based on the learnings from the pilot, it is planned to expand the digitization of KCC lending to other districts in these two states and gradually across the country,” RBI said.
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