Union Finance Minister in his budget speech for the year 1998-99 had desired that the banks should issue Kiss an Credit Cards to farmers on the basis of their land holdings so that the farmers may use for ready purchase of agricultural inputs such as seeds, fertilizers, pesticides, etc. and draw cash for their production needs NABARD was asked to formulate a model scheme in this regard for uniform adoption by banks.
Accordingly, NABARD has since formulated a model Kisan Credit Card Scheme in consultation with major banks. The Scheme has been recommended to banks for adoption. The salient features of the scheme are as under:
(i) Kisan Credit Card Scheme aims at adequate and timely support from the banking system to the farmers for their cultivation needs including purchase of inputs in a flexible and cost effective manner. The scheme is to be implemented by commercial banks, RRBs and Co-operative Banks.
(ii) The scheme would primarily cater to the short term requirements of the farmers. Under the scheme banks may provide the Kisan Credit Card to farmers who are eligible for production credit of Rs. 5,000/- and above. The credit extended under the KCC Scheme would be in the nature of a revolving cash credit and provide for any number of drawals and repayments within the limit.
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(iii) While fixing the limit, the bank may take into account the entire production credit requirements of the farmer for the full year including the credit requirements of the farmer for the ancillary activities related to crop production such as maintenance of agricultural machinery/implements, electricity charges, etc.
(iv) The Credit Card should normally be valid for 3 years subject to an annual review. The credit limit under the card will be fixed on the basis of the operational land holding, cropping pattern and scales of finance as recommended by the District Level Technical Committee (DLTC)/State Level Technical Committee (SLTC).
(v) Banks may apply the same rates of interest as are applicable to crop loans and the security/margin norms, etc. should be in conformity with the instructions issued by RBI/NABARD from time to time.
(vi) The KCC facility being in the nature of cash credit accommodation for agricultural purposes, the prudential norms as applicable to such facilities would apply to KCC accounts.
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Repayment
The amount drawn or utilised against the card should be repaid to the bank by the farmers within 12 months of drawal of money.
Progress of the Scheme
As in March 1999, a total of 7, 83,000 KCC cards with credit facility covering a sum of Rs. 2310 crore have been insured by all banks to farmers throughout India. The banks are fast popularizing the scheme among farmers.
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Credit card scheme is still in its infancy, in India. It is now for the bank managements to seize the opportunities offered by the huge populace and growing number of working class/fixed income earners. The Bank cards are, however, becoming popular in India.
Various banks have introduced credit cards either jointly with other banks or independently. For example, Bank of Baroda has introduced its credit card known as “BOBCARD”. Similarly Central Bank of India has introduced “Central Card” and State Bank of India, the ‘SBI Card’.
It may also be told that as per current income tax regulations all persons holding credit cards must file their annual income tax returns.
A Debit card is a card that has direct access to our bank account. The card is issued by our bank. Whenever we use our debit card, our bank account is debited immediately. Unlike credit cards, we don’t enjoy any credit period and therefore the debit card does not have minimum income eligibility criteria.
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There are two types of debit cards and two types of debit card transactions:
1. ‘Direct’ debit cards allow only “on-line” transactions. An immediate electronic transfer of money from our bank account to the merchant’s account. This requires us to enter our PIN or Personal Identification Number at the store’s terminal.
The system then checks our account for sufficient funds to cover the purchase. These are typically the cards that come with the “Maestro” logo, from Mastercard. An example is the Suvidha debit card issued by Citibank in select cities.
2. A ‘Deferred’ debit card looks similar to a credit card, but is not a credit card. It bears a Visa or MasterCard logo, and can be used wherever our card’s brand name is displayed.
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This card allows “off-line” and “on-line” transactions. Offline purchases are where the shopkeeper’s terminal scans our card and creates a debit against our account.
We are not required to enter our PIN at the store’s terminal. Most off-line transactions are verified immediately to see whether there is enough money in our account. Off-line debit cards usually carry the ‘Electron’ logo, from Visa. HDFC Bank issues Electron debit cards in more than 15 cities around the country.
Features of Debit Card
i. It is a combination of a Cheque and ATM card. Therefore, there are no fees for using the ATM for cash withdrawal, or as a debit card for purchase.
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ii. The Debit Card service is meant for withdrawals against the balance already available in the designated account.
iii. It is the card holder’s obligation to maintain sufficient balance in the designated account to meet withdrawals and service charges.
iv. A Debit card is more affordable than a credit card. We just use our bank account for all our transactions.
v. No credit period. Our bank account is debited immediately.
vi. No credit check is required to get a Debit card.
vii. Use of the card is terminated without notice, upon the death, bankruptcy or insolvency of the cardholder or for other valid reasons.
viii. Spending is limited to our bank balance.
Operating Conditions of the Debit Card
The following are the general operating conditions of debit card service.
1. Personal Identification Number (PIN)
The Personal Identification Number (PIN) is used for withdrawing cash or for purchasing goods and services at a merchant establishment. The PIN should be safeguarded carefully.
2. Loss of card
The cardholder should immediately notify the customer branch by letter or by a phone call followed by confirmation in writing, if the card is lost/stolen. Any financial loss arising out of unauthorized use of the card till such time as the bank hotlists the card will be to the cardholder’s account.
3. Balance Enquiry
The cardholder can view the balance in the designated account and also obtain a transaction receipt indicating the balance.
Drawbacks of Debit Cards
No Grace Period
Unlike a credit card, debit card transactions are on a “pay now” basis. 2. Limited Protection
Using a debit card may mean we have less protection than we would have with a credit card for undelivered or defective goods.
Merchant Banking
Merchant Banks are financial intermediaries. They act as intermediaries for transfer of capital from those who own it to those who use it.
Merchant Bankers provide assistance to the corporate houses for setting up industries. While banks assist industrial development by providing term loans and guarantees for setting up units and working capital, merchant bankers play a different role by assisting Industrial houses in the very formation of the unit and their horizontal and vertical expansion.
The steps involved in the formation of a company, setting up the plant, meeting unforeseen situation-legal and other provisions, rising of capital require expert assistance in various fields. Merchant bankers assist in this process of coordinating various opportunities and financial options.
Although merchant banking services no longer a part of commercial banking operations in India a brief account of these activities are provided in this chapter. These services do not come under the control of RBI, but are regulated by Securities and Exchange Board of India (SEBI).
However, banks are forming subsidiaries to undertake merchant banking activity and RBI may be interested in verifying the books of banks’ subsidiaries. SBI was the first Indian Bank to set up a merchant banking subsidiary, followed by Canara Bank. A number of banks have set up subsidiaries or separate departments for this business.