In a severe blow to farmers in the state, it has become clear that the reintroduction of Service Area Approach in lending, in tune with an RBI order, is poised to make the popular 4 percent interest-bearing Kissan Credit Card loans out of the reach of a vast majority.
The Service Area Approach dictates a scheme wherein each ward in the state is allotted to a bank as an exclusive service operational area, both in the public and private scheduled sector banks.
The catch is that only public sector banks are able to release KCC loans with a Rs 3-lakh limit and repayment duration of one year at 4 percent annual interest.
Non-availability of interest subvention for KCC loans released by private sector banks raises the interest component up to 14 percent per annum.
The Service Area Approach forbids a farmer to avail of a KCC loan from any banks other than the bank which is allotted jurisdiction in the ward where he lives.
Interest rate for KCC loans from private banks is as follows: ICICI 14, HDFC 12, Axis 12, Federal Bank 10.
75, INGVysya 13.
75 and South Indian Bank 13.
All fresh KCC loans are covered by the decision and the short-term loans released by co-operative banks will also in the high-interest pattern.
RBI, vide a letter dated January 9, 2012, had intimated that KCC loans with effective rate of interest of 4 percent is implemented through public sector banks only.
An estimated 62 percent farmers in the state are dependent on private sector and co-operative banks and hence they will be automatically out of the purview of the low interest KCC loans.
Dilution in Service Area Approach norms was allowed earlier with a view to facilitating rural borrowers to have easy access to institutional credit from any bank of their choice at a competitive rate and to provide banks, public and private, with a level-playing field.
Kerala State Cooperative Agriculture and Rural Development Bank (KSCARD Bank), which oversees and channelise the entire KCC loans through cooperative banks had informed the State-Level Bankers Committee that the interest subvention scheme of the the Union Government was denied to them.
SLBC through an order dated May 14, 2012 had allocated `4,630 crore as the target for KCC loans for commercial banks for the year 2012-13.
Public sector banks have been allotted `1799.
50 crore, which is 38.
8 percent of the KCC target.
The remaining 62 percent has been allotted to private sector commercial banks (`969.
5 cr) and cooperative banks ( `1861 cr).
“The SLBC has not introduced the Service Area Approach on its own.
It is a government-sponsored scheme.
However, relaxation was allowed in the Kerala context earlier.
Undoubtedly, there is lot of disparity in interest rates and anomalies in the scheme,” admitted P Anil Kumar, DGM, SLBC, Kerala to Express.
However,KCC is not found in the list of governmentsponsored schemes in the agenda and background notes for SLBC (Pages 25 and 26) and only SGSY and PMEGP are the marked lending programmes.