RBI Issues KCC Directions for Small Finance Banks

The Reserve Bank of India (RBI) has issued the RBI (Small Finance Banks – Kisan Credit Card Scheme) Directions, 2026 to provide a revised framework for loans sanctioned under the Kisan Credit Card (KCC) Scheme by Small Finance Banks (SFBs).

The Directions will apply to loans sanctioned under the KCC Scheme with effect from 01 January 2027.

1. Applicability of the Directions

The Directions are applicable to:

• Small Finance Banks (SFBs); and
• Loans sanctioned under the Kisan Credit Card Scheme on or after 01-01-2027.

The framework seeks to enhance access to agricultural credit and strengthen financial inclusion among farmers.

2. Flexible Credit Limits for Marginal Farmers

The Directions introduce flexible credit limits for marginal farmers.

Under the revised framework, Small Finance Banks may sanction credit limits ranging from:

₹10,000 to ₹50,000

based on the bank’s assessment of the borrower’s credit requirements.

3. Credit Limits Not Linked to Land Value

The Directions provide that the credit limit for marginal farmers shall be determined without linking it to the value of land holdings.

Instead, the assessment should focus on the actual financing needs of the farmer, thereby facilitating easier access to institutional credit.

4. Credit Assessment Based on Agricultural Requirements

The credit limit is required to be determined having regard to:

4.1 Crop Cultivation Requirements

• Type of crops grown;
• Cropping pattern; and
• Working capital requirements for cultivation.

4.2 Post-Harvest Credit Needs

• Warehouse storage-related financing requirements; and
• Other post-harvest expenses.

4.3 Farm-Related Expenditure

• Agricultural input costs;
• Farm maintenance expenses; and
• Other eligible farming-related needs.

5. Collateral and Margin Requirements Waived for Small Agricultural Loans

A significant feature of the Directions is the relaxation relating to collateral security and margin requirements.

Small Finance Banks are required to:

• Waive collateral security requirements; and
• Waive margin requirements

for agricultural loans up to:

₹2 lakh per borrower

This measure is intended to improve access to formal credit, particularly for small and marginal farmers.

6. Objective of the Directions

The Directions seek to:

• Improve credit accessibility for farmers;
• Promote financial inclusion in the agricultural sector;
• Reduce dependence on land-value-based lending;
• Facilitate collateral-free agricultural credit; and
• Strengthen implementation of the Kisan Credit Card Scheme.

7. Expected Impact

The revised framework is expected to make agricultural credit more accessible by introducing flexible credit assessment criteria and removing collateral and margin requirements for smaller loans. The measure is likely to particularly benefit marginal farmers and support their cultivation and post-harvest financing needs.

8. Key Takeaway

RBI has issued the Small Finance Banks – Kisan Credit Card Scheme Directions, 2026, effective for loans sanctioned on or after 01 January 2027. The Directions provide for flexible credit limits of ₹10,000 to ₹50,000 for marginal farmers, based on agricultural requirements rather than land value, and mandate the waiver of collateral security and margin requirements for agricultural loans up to ₹2 lakh per borrower.

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