Impact of Agricultural Credit on NPAs of Indian Banks: A Focus on the Kisan Credit Card Scheme

Abstract

This study investigates how the NPAs of banks in India are affected by the Kisan Credit Card (KCC) program and outstanding credit to agriculture. The KCC program, introduced in 1998, attempts to improve loan availability for agricultural endeavours. The impact of the program on banks’ asset quality hasn’t been noticed much, despite its significance. By analysing data from 2016-17 to 2022-23, this research uses regression analysis in SPSS Software to assess how variations in KCC accounts and agricultural credit volumes influence net NPAs. The Durbin-Watson test and residual analysis are applied to confirm the validity and normality of the results of the regression analysis. The findings reveal that increased financing to the agricultural sector does not contribute to higher NPAs in Indian banks, indicating strong risk management practices. This implies that increasing financial inclusion in agriculture is possible without endangering banks’ capacity to remain solvent. The study underscores the importance of effectively managing KCC and agricultural credit to maintain bank stability and provides actionable insights for financial institutions and policymakers.

Keywords: Kisan Credit Card, Agricultural Credit, Net Non-Performing Assets, Indian Banks, Financial Stability

View PDF