Banks look to monitor end-use of Kisan cards

Public sector banks (PSBs) are stepping up vigilance on spending under the Kisan Credit Card (KCC) scheme following instances of misuse and diversion of funds by farmers through the card.

The banks plan to monitor funding by tying up with agriculture input merchants. The method will be, however, effective only if the KCC is converted into a smart card or a debit card.

In the recent past, various farmers forum and bankers forum have made representations to the government at various levels to partly convert the KCC into a smart card or a debit card, said a deputy general manager with a south-based public bank. The conversion will help banks monitor the spending under this scheme, he added.

Under the current scheme the farmer has the freedom to go to any agro input provider (merchant) to meet his input requirements. However, the bank has no way to check the authenticity of the dealer and the bill produced by the farmer, a banker said.

If the KCC works like a smart card, then banks would be able to track the credit history of a farmer efficiently, said a chairman of a PSU bank.

Secondly, banks can tie up with local input providers (merchants) to curtail diversion of funds and non-performing assets (NPAs) in priority sector lending at large, he added.

At present, banks have a tie-up with commodity boards which provides training and specific inputs for agriculture activities. In such a tie-up, the bank provides the loan and the board the necessary expertise and advice for conducting farming activity.

For instance, Vijaya Bank has a tie-up with the vegetable and fruit promotion council of Kerala. As per the allinace, the bank provides loans to farmers, while the council trains and providers plantation material to farmers. Later, the farm produce is sold to the Kendra-owned by the council.

In 2003-04, banks' disbursals under KCC fell to Rs 19,289 crore against Rs 26,278 crore. Co-operative banks have sanctioned 9,855 crore KCC in 2003-04 against Rs 15,841 crore in 2002-03.

Commercial banks sanctioned Rs 6,835 crore in 2003-04 compared with Rs 7,481 crore in 2002-03. Co-operative banks issued Rs 2.42 crore; regional rural banks Rs 39 lakh and commercial banks Rs 1.32 crore.