RBI Draft KCC Directions 2026: Major Changes in New KCC Scheme Explained

The Reserve Bank of India (RBI) has released the Draft – Reserve Bank of India [Commercial Banks – Kisan Credit Card (KCC) Scheme] Directions, 2026, proposing a comprehensive regulatory framework for KCC loans issued by commercial banks 01CB12022026F16F191131F3C4613AB….

The draft consolidates earlier circulars and provides detailed guidelines on eligibility, credit limits, working capital assessment, allied activities financing, collateral norms, repayment structure, and digital operations.

Below is a detailed breakdown of the key provisions.

1. Applicability: Who Will Follow These Directions?

• Applicable to all Commercial Banks
• Not applicable to:
  • Small Finance Banks
  • Payment Banks
  • Local Area Banks
  • Overseas branches of Indian banks

Existing KCC loans sanctioned before issuance will continue under old guidelines until renewal.

2. Objective of the 2026 KCC Framework

The RBI aims to:

• Ensure adequate and timely credit
• Provide a composite facility
• Cover both:
  • Working capital needs
  • Investment credit needs
• Use simple and standardized procedures

3. Composite KCC Structure – 6 Year Tenure

Under the new framework:

• KCC will have a 6-year tenure
• It includes:
  • Short-term credit
  • Long-term investment credit

The Composite Maximum Permissible Limit (CMPL) becomes the official KCC limit

4. What Expenses Can Be Covered Under KCC?

According to Chapter II , KCC will cover:

A. Crop Cultivation

• Short-term crop loans

B. Allied Activities

Including:

• Animal Husbandry
• Dairy
• Fisheries & Aquaculture
• Sericulture
• Beekeeping
• Lac culture

C. Other Needs

• Post-harvest expenses
• Farmer household consumption
• Maintenance of agricultural assets
• Crop, accident, health & asset insurance
• Produce marketing loans
• Investment credit (pump sets, dairy units, irrigation, etc.)

5. How Drawing Limit Is Calculated in New KCC

Drawing Limit =

1. Scale of Finance (SoF) × Area
   • 10% (post-harvest & household consumption)
   • 20% (repairs, maintenance, technology, certification)
   • Insurance cost

If SoF is not notified:

• Bank may apply 10% notional hike over previous season

Special Provision for Marginal Farmers

For farmers with land up to 1 hectare:

• Flexible KCC limit: ₹10,000 to ₹50,000
• Known as Flexi KCC
• Valid for 6 years

6. Interest Rate Rules

As per Chapter III

• Interest as per RBI Interest on Advances Directions 2025
• Short-duration crops: Interest periodicity based on crop cycle
• Long-duration crops: Annual rests
• For small & marginal farmers:
  • Total interest debited cannot exceed principal amount
• Interest must be paid on minimum credit balance in CC account (10th to month-end)

7. Collateral & Margin Norms in New KCC Scheme

As per Para 26-28

• No collateral required up to ₹2 lakh
• For KCC with tie-up recovery: Collateral waived up to ₹3 lakh
• Above ₹2 lakh:
  • As per bank’s credit policy

Voluntary pledge of gold up to collateral-free limit is allowed (with declaration).

8. Digital & Operational Enhancements

Banks must enable:

• UPI transactions
• Debit cards
• Mobile banking
• Internet banking
• NEFT
• RTGS
• CBDC
• ATMs / micro-ATMs
• PoS terminals

This strengthens financial inclusion and digital agriculture lending.

9. Insurance Provisions

Farmers may opt for:

• Crop insurance
• Asset insurance
• Personal accident insurance
• Health insurance

Premium can be debited through KCC account with explicit consent

10. Investment Credit Examples (From Annex I)

The draft provides detailed illustrations.

Example 1 (Short Duration Crop Model)

Composite KCC Limit (6th year):

• Crop working capital: ₹1,49,777
• Allied activity: ₹29,956
• Investment credit: ₹1,50,000
• Total: ₹3,29,733

Example 2 (Long Duration Crop Model)

Composite KCC Limit (6th year):

• Crop working capital: ₹1,77,023
• Allied activity: ₹4,25,981
• Investment credit: ₹2,00,000
• Total: ₹8,03,004

11. Reporting & Compliance in New KCC Scheme

Banks must:

• Submit quarterly KCC data
• Report within 15 working days after quarter end
• Follow RBI IRAC norms (Income Recognition & Asset Classification)

12. Circulars Repealed

The draft repeals:

• 1998 KCC circular
• 2012 revised KCC scheme
• 2016 & 2017 Master Circulars
• 2019 Animal Husbandry working capital circular
• 2022 Fisheries eligibility circular
• Total 16 circulars repealed

New Benefits for Farmers

• Larger structured 6-year composite limit
• Clear formula-based working capital
• Digital access to funds
• Collateral-free loans up to ₹2 lakh
• Special protection for small & marginal farmers
• Unified regulatory framework

The Draft RBI KCC Directions 2026 mark a decisive shift. They move from a scheme-based approach to a structured regulatory framework for agricultural credit. The RBI is modernizing how rural finance operates. It is introducing a six-year composite limit. It is also expanding allied activity coverage, strengthening collateral-free lending, and integrating digital payment systems. The emphasis on standardized loan calculations shows a serious effort. This includes implementing farmer protection measures and ensuring clearer supervisory oversight. These efforts align credit delivery with real farming cycles and evolving rural income models.

If finalized in its current form, these directions could significantly improve credit accessibility. They could enhance transparency. They could also aid long-term financial planning for farmers across India. At the same time, banks will need to upgrade systems and strengthen monitoring to comply with the new structure. Ultimately, New KCC Scheme 2026 has the potential to transform agricultural lending. It could shift from a seasonal support mechanism into a more stable and growth-oriented financial foundation for rural India.

Read the New KCC Scheme Draft Guidelines Here