Kisan Credit Card: How a Bihar Farmer Gets a Loan at 4% Interest

Many farmers still borrow from moneylenders at rates far above what a bank would charge. The Kisan Credit Card (KCC) exists to fix that. It is a bank credit line for farming costs, with an interest rate the government subsidises. This guide explains how it works and how to apply. It is part of our money guide for Bihar farmers.

How the interest works: 7% becomes 4%

Under the government's Modified Interest Subvention Scheme, short-term farm loans through a KCC carry 7% interest. Farmers who repay on time get an extra 3% incentive, so the effective rate falls to 4%.

A simple example. You borrow ₹1,00,000 for a year:

	Interest for the year
At 7%	₹7,000
At the effective 4% (repaid on time)	₹4,000

The 3% reward depends on paying back within the due date. If you repay late, you can lose it, so plan the repayment around your harvest sale before you borrow.

What the limits are

• Interest subsidy limit: the government describes the scheme as covering short-term loans up to ₹3 lakh. The 2025 Budget announced raising this to ₹5 lakh, but the March 2026 government statement still refers to the ₹3 lakh scheme. Ask your bank which limit applies today.
• No collateral up to ₹2 lakh. RBI raised the collateral-free limit for short-term farm loans from ₹1.60 lakh to ₹2 lakh per borrower from 1 January 2025.
• Revolving credit. A KCC works like a limit you can draw from and repay repeatedly, valid up to five years, with features such as an ATM-enabled debit card and one-time documentation.
• Not only crops. Since 2019, KCC also covers the working-capital needs of animal husbandry, dairying and fisheries. For loans taken only for animal husbandry or fisheries, the interest benefit applies up to ₹2 lakh.
• Disaster relief. If crops are hit by a natural calamity, the government says interest relief can continue for up to one year, and up to five years in severe cases.

How to apply, step by step

1. Pick where to apply. You can apply at a commercial bank, Bihar Gramin Bank, or a cooperative society (PACS). Use our bank IFSC finder to find a branch near you.
2. Carry your papers. Typically: Aadhaar, a recent photograph, your bank account details, and proof of your land or tenancy as your bank requires. Banks differ, so ask which land document they accept.
3. Fill the KCC form and state your cropping plan and the amount you need. Ask for a limit that matches your real costs, not the maximum.
4. Check the fees in writing. Ask for the bank's fee schedule, including any legal or documentation charge, before you sign.
5. Apply online if you prefer. The government's Jan Samarth portal is a one-stop digital platform to apply for government-linked loans including KCC, though whether it is available depends on your bank.
6. Use the card, then repay on time. Draw only what you need, and pay back before the due date to keep the 4% rate.

Which loans to avoid mixing up

A KCC is for short-term farming costs: seeds, fertiliser, labour, and similar working capital. For a tractor, pump or a shed, you would normally take a term loan with fixed monthly instalments. Work out that instalment first with our loan EMI calculator, so the repayment fits your income.

Common mistakes

• Borrowing the full limit "because it is available" and then paying interest on money you did not need.
• Missing the due date, which can cost you the 3% incentive.
• Paying an agent to "arrange" the card. The application is free to start, and the bank sets its own charges.

Next: crop insurance for Bihar farmers and where to keep small savings.

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This is general information, not financial advice. Interest rates, limits and fees vary by bank and can change. Confirm the current terms with your bank before you borrow.