The Indian government plans to expand the scope of its widely used Kisan credit card to enable farmers to use it also as a debit card linked to a separate account that earns interest, an official at the Ministry of Agriculture privy to the discussions tells PaymentsSource.

The additional account would hold farmers’ proceeds from their sales, says the official, who requested anonymity.

The National Bank for Agricultural and Rural Development launched the Kisan credit card in 1998. Rural and cooperative banks across India issue the card based on farmers’ land holdings so they may buy supplies such as fertilizer and pesticides.

However, farmer must repay their Kisan card loans within three years, and they may make any number of cash advances and purchases within a fixed limit based on the scale of their farm operations.

Kisan cardholders also may secure cash advances for farming-related purchases at a low interest rate. They must pay back cash advances within 12 months. The cards impose annual interest rates of less than 5%.

“What the government and the finance ministry are trying to do is use the card as a vehicle for financial inclusion in the rural areas,” the official says. With Kisan credit cards, the farmers after the change would be “financially included,” he says.

Farmers would be able to save their earnings in a safe manner and earn some interest, which would help to offset the interest they pay on their card loans, he says.

One state in India recently demanded that the central government upgrade its Kisan credit card so farmers may use it at ATMs and keep it longer before requiring a new one (see story).

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