UPSC CSE Prelims
Credit and Financing Schemes Previous Year Questions (PYQs)

Detailed Explanation:

Answer: Option 2 — 1, 3 and 4 only

The Kisan Credit Card (KCC) scheme provides short-term credit support for agricultural operations, post-harvest activities, and consumption needs of farm households. It does not cover long-term capital investments like purchase of heavy machinery or construction of buildings.

✅ Statement 1 – Correct: Working capital for maintenance of farm assets (irrigation, fertilizers, labor costs) is covered under short-term credit support of KCC.
❌ Statement 2 – Incorrect: Purchase of combine harvesters, tractors, and mini trucks are capital-intensive assets requiring long-term investment credit, not covered under short-term KCC credit.
✅ Statement 3 – Correct: Consumption requirements of farm households are covered under KCC, typically capped at a certain percentage of the credit limit.
✅ Statement 4 – Correct: Post-harvest expenses including storage, transportation, and marketing of produce are eligible under KCC short-term credit.
❌ Statement 5 – Incorrect: Construction of family house and setting up village cold storage facilities are long-term capital investments, not covered under short-term credit component of KCC.

📝 Short Notes: Kisan Credit Card (KCC) Scheme

• Launched: 1998-99 by NABARD to provide timely and adequate credit to farmers
• Objective: Single window for meeting short-term, medium-term and long-term credit needs of farmers
• Short-term credit coverage: Cultivation expenses, post-harvest expenses, produce marketing loan, consumption needs, working capital for farm asset maintenance
• Allied activities: Dairy animals, inland fishery, poultry, beekeeping covered under KCC
• Interest subvention: Government provides interest subsidy to make credit affordable (typically 2% subvention, additional 3% prompt repayment incentive)
• Validity: 5 years, subject to annual review; credit limit fixed based on land holding and cropping pattern
• Collateral: No collateral required up to ₹1.6 lakh credit limit

Detailed Explanation:

✅ Statement 1 – Correct: Regional Rural Banks (RRBs) provide direct credit assistance to rural households, including small and marginal farmers, agricultural laborers, and rural artisans.

❌ Statement 2 – Incorrect: NABARD is an apex development bank that provides refinance facilities to banks and financial institutions; it does not grant direct credit to rural households except through limited pilot schemes.

✅ Statement 3 – Correct: Land Development Banks (State Cooperative Agriculture and Rural Development Banks) provide long-term direct credit to farmers for land development, irrigation, and agricultural improvements.