In a country like India, rural credit is a crucial pillar for inclusive economic growth, as it caters to the requirements of agriculture and allied activities and millions of ancillary industries and small businesses. The KCC Scheme, introduced in 1998, has been the predominant mode of formal financing for farmers in India. Over the years, significant improvements have been made in the scheme which has led to an increase in its uptake. 

To understand if the KCC process can be made more seamless, RBIH conducted extensive secondary and primary field research in Tamil Nadu and Karnataka to identify the problems being faced by small and marginal farmers in availing credit through the KCC scheme. 

The study found the following key issues:

→ Largely paper-based process
→ High Turn Around Times (TAT) of up to 4-6 weeks
→ Upto 5% additional costs (for a loan of ₹1 lakh) for the farmer towards documentation.
→ Multiple bank branch visits required

Based on these learnings, RBIH designed an end-to-end digital KCC loan journey (for amounts below Rs 1.6 lakh) which eliminates the need for paper-based processes and human interventions. Lenders can leverage multiple data sources such as state government land records, Aadhaar e-KYC, Aadhaar e-Sign, credit scores, satellite data to develop an automated business rules engine (BRE) to provide KCC loans seamlessly.

The results of the pilot showcased a significant improvement in the turnaround time (TAT), from 4-6 weeks to less than 10 minutes, with no human intervention in the loan process. The end-to-end KCC Digitalisation Project reduces the loan disbursement time by adopting a straight-through digital process that leverages India’s Digital Public Infrastructure. It eliminates paper-based documentation, leverages APIs for land ownership verification, minimises assessment time through automation, significantly reduces human intervention and uses e-sign for loan agreements. The digital KCC loan journey has been enabled through the Unified Lending Interface.