As a part of its latest move aimed at tightening loan based guidelines to ensure better recovery of capital and more fair terms for borrowers, RBI recently issued updated draft guidelines to be followed by recognised lenders including banks to recover loans.
As per the draft guidelines issued by RBI, recovery agents must avoid violating borrowers’ privacy, refrain from visits and calls during inappropriate occasions such as weddings and avoid any harsh methods towards recovery.
The draft proposes that lenders put in place a structure to monitor and control the activity of recovery agents and ensure that they refrain from actions that could damage their integrity and reputation.
The central bank also issued draft guidelines on the Kisan Credit Card (KCC) scheme, aimed at expanding coverage, streamlining operational aspects and addressing emerging sectoral requirements.
RBI has sought feedback and comments on the draft guidelines from the regulated entities, members of the public and other stakeholders by March 6, 2026. The Kisan Credit Card scheme was launched to offer farmers easy access to affordable credit for their agricultural needs.
Revamping Kisan Credit Card scheme
The Reserve Bank of India (RBI) has released a revised set of draft guidelines for the Kisan Credit Card (KCC) scheme. These updates aim to modernize the credit system, align loan cycles with actual harvest timelines, and bring more transparency to the borrowing process for farmers.
One of the most significant changes in the draft is the standardization of crop seasons to ensure uniformity in how loans are sanctioned and repaid.
- Short-Duration Crops: Defined by a 12-month cycle.
- Long-Duration Crops: Defined by an 18-month cycle.
- Extended Loan Tenure: To better match these cycles, the RBI has proposed extending the tenure of KCC loans to six years. This shift is designed to ensure that repayment deadlines do not clash with the actual production and selling timelines of the farmers.
Funding for Agritech and organic farming
The RBI is also expanding what a KCC loan can cover. Recognizing the shift toward modern farming, the draft framework now includes “technological interventions” as eligible expenses.
Under the 20% provision usually earmarked for the maintenance of farm assets, farmers can now seek funds for the following listed items.
- Soil testing and real-time weather forecast services.
- Certification costs for organic farming or “Good Agricultural Practices.”
- 3 Maintenance of essential modern machinery and digital infrastructure.
Streamlined credit limits
The draft guidelines aim to align “drawing limits” with the actual “scale of finance” for each specific crop season. This means the amount of credit a farmer can withdraw will be more accurately tied to the real-world cost of cultivation of specific crops.
The goal is to prevent under-funding while also ensuring farmers don’t take on more debt than their harvest can support.
A safety net against informal lending
Since its inception, the KCC scheme has served as a critical tool to keep farmers away from high-interest informal moneylenders. It covers post-harvest expenses and household consumption needs and investment requirements for allied sectors like dairying, fisheries, and animal husbandry.