Launched in 1998 with the aim of modernising rural credit, the Indian government’s Kisan Credit Card (KCC) scheme was designed to offer accessible, short-term, low-interest loans to farmers – ostensibly to support agricultural inputs like seeds, fertilisers, and equipment.

Pegged at a modest annual interest rate of 4%, the revolving credit line, issued against landholdings was intended as a safeguard against exploitative informal lenders who had long dominated India’s agrarian economy.

But in practice, the KCC has steadily drifted away from its core mandate.

In many parts of rural India, where agriculture barely provides subsistence and traditional social burdens like dowry still remain entrenched, the KCC has mutated into a fragile substitute for household income. What was supposed to enable productivity now often fuels survival.

For example, a resident of Meerut district in Uttar Pradesh, in 2023, instead of sowing sugarcane or buying fertilisers, used the KCC (issued in his father’s name) to fund a dowry demand. The prospective groom’s family had asked for a Maruti Wagon-R, a Mahindra Scorpio SUV, and several lakhs in cash.

Armed with the KCC, which functions much like a standard credit card including ATM withdrawals, he made a down payment on the Wagon-R. Unfortunately, the marriage collapsed in early 2025 after additional dowry demands surfaced but by then, Mohsin had defaulted on loan instalments, was saddled with an unwanted vehicle, and most critically had no funds to invest in that season’s crop.

When farmers miss the scheduled repayment within a crop cycle, the subsidised 4% interest rate is revoked and it jumps to 7%, pushing already-struggling farmers deeper into debt.  And for may this results not only in a financial setback but also a debt cycle difficult to break free from.

Across India’s northern agrarian heartland, farmers are increasingly tapping into KCC funds for non-agricultural emergencies, driven by inadequate public welfare systems.

To put it into perspective, India’s public healthcare spending remains below 2.5% of GDP, among the lowest in the world. A single medical emergency can wipe out years of income, pushing families to borrow whatever they can even if it means mortgaging their future harvests.

Hence, KCC funds are now routinely diverted for expenses related to healthcare, education, and weddings. This results in “development debt trap” – where loans meant to enhance farm productivity are instead consumed by essential survival costs.

This trend isn’t just anecdotal. A 2024 study published in The Pharma Innovation Journal revealed that only a fraction of KCC loans are used for agriculture. Among respondents, 28% admitted using the funds for household needs, 22% for medical expenses, 14% for children’s education, and nearly 10% for marriage-related costs.

This repurposing of credit is a clear indicator of systemic rural distress, one that cannot be addressed by credit expansion alone.

It raises critical questions –  Is the KCC still serving its intended purpose? Or has it become yet another quick fix masking a much deeper structural failure?

The implications are sobering: a scheme designed to enhance farm productivity is now functioning as an emergency survival tool.

Many acknowledge, “Farming barely pays enough to sustain a family,” if there’s a medical emergency or a wedding, the pressure is too much.” In such places, where social traditions are non-negotiable and healthcare is a luxury, farmers fall back on the only accessible form of formal credit they have – KCC.

But when crops fail, markets crash, or the harvest doesn’t fetch enough, the debt doesn’t just mount – it humiliates.

For instance, in a village, a man in his forties was declared a defaulter  – his name was read out in the village square. The shame was so unbearable that his wife moved back to her parents’ home. No one has seen the man since. Whether he fled, disappeared, or met a worse fate remains unknown.

This culture of public shaming, especially in tightly knit rural communities, adds a heavy emotional cost to financial failure.

To avoid default and disgrace, many farmers fall into the hands of private middlemen who offer to ‘renew’ KCC loans without actually settling the previous principal. But this “service” comes at a steep cost – exorbitant interest rates that further entrench farmers in cycles of debt.

Thomas Franco, former general secretary of the All India Bank Officers’ Federation, states: “Schemes like KCC have indeed improved access to credit. But they have also created a dangerous dynamic—a debt trap disguised as credit empowerment.”

According to Franco, by the time harvest season arrives, most farmers are already drowning in earlier liabilities. Instead of investing in better seeds, irrigation, or machinery, KCC loans are routinely diverted to meet urgent social or medical obligations.

On paper, though, the numbers suggest an entirely different story.

By 2024, India’s KCC disbursals crossed $120 billion, more than double the $51 billion recorded a decade earlier. Yet these figures, Franco warns, are deeply misleading.

“What looks like a new loan disbursal is often just a renewal. The farmer doesn’t receive fresh funds, but the bank books it as a new transaction. This allows lenders to present an inflated picture of credit success,” he explained.

The tragic consequence of this accounting sleight-of-hand? Millions of farmers remain trapped in invisible debt, unable to break free or start afresh.

And in the bleakest corners of this crisis, the worst outcome is becoming far too common – suicides.

As debt swells and dignity erodes, many farmers are choosing to end their lives rather than endure public disgrace and generational insolvency. Maharashtra, India’s wealthiest state and contributor of nearly 13% to the national GDP, also holds another grim distinction: the highest number of farmer suicides.

In 2023 alone, Maharashtra reported 2,851 farmer suicides, a staggering number by any metric. And the crisis is worsening. Within just the first quarter of 2025, Marathwada – one of the state’s most agrarian yet drought-prone regions – recorded 269 suicides, up 32% compared to the same period in 2024. The number is not a spike; it’s a warning signal.

The rot is spreading. In Karnataka, another major agrarian state, 1,182 farmers took their own lives between April 2023 and July 2024, driven by persistent droughts, poor yields, and compounding debt. In Uttar Pradesh, India’s most populous state, farmer suicides shot up by 42% in 2022. Even in Haryana, known for relatively better farm incomes, suicides rose to 266 in 2022, from 225 a year earlier – an 18% rise in just 12 months.

This isn’t just a crisis of numbers; it’s a collapse of policy vision; many argue that stop-gap schemes like the Kisan Credit Card (KCC) may provide temporary liquidity, but they do not address the deeper ailments afflicting Indian agriculture – unremunerative prices, climate shocks, rising costs, and a near-total lack of social safety nets.

“India’s agricultural credit system is divorced from the lived realities of farmers,” says Jayati Ghosh, a leading development economist and professor at the University of Massachusetts Amherst. “Crop loans are often designed to operate within a rigid seasonal window, yet farmers borrow months before sowing, and only get paid weeks or months after harvest. Forcing repayment in that narrow window is not just unrealistic—it’s harmful.”

Ghosh, who has spent over three decades studying agrarian distress and co-authored a 2021 policy report for the Andhra Pradesh government, points fingers at the very architecture of rural finance – from NABARD, India’s apex rural development bank, to the Reserve Bank of India (RBI) and successive central governments.

According to her, treating farming as a typical commercial venture rather than a livelihood lifeline has set the stage for today’s disaster.

“We’ve built a credit system on the flawed assumption that cash alone can rescue rural India. But credit without irrigation, land rights, market access, local crop research, and storage facilities is like building a house on sand. Eventually, it collapses.”

She calls for deep structural reforms, not band-aid schemes: subsidised lending, decentralised credit mechanisms, and loans that reflect the biological cycles of farming – not bureaucratic convenience.

Until then, India’s farmers will continue to walk a tightrope strung between monsoons and moneylenders, with death too often becoming the only escape from an unforgiving system.

Ghost Loans, Broken Promises, and a System on Auto-Pilot

The Kisan Credit Card (KCC) scheme is increasingly finding itself ensnared in forged documents, phantom loans, and institutional negligence.

In Kaithal, a small town in Haryana, six farmers secured loans worth nearly $88,000 using falsified documents. When repayments lapsed and interest accrued, the amount ballooned to $110,000 – uncovered only after the damage had already been done.

The rot runs deep and far. In Uttarakhand, a dealer with the help of a bank manager, orchestrated a ghost loan scam worth $1.2 million by fabricating purchase bills and creating non-existent beneficiaries. He was sentenced in March 2023, nearly a decade after the fraud occurred.

In Lucknow, the capital of Uttar Pradesh, three managers at the State Bank of India greenlit $792,000 in fake KCC loans between 2014 and 2017. Forged land records and fabricated identities passed through without raising flags – until an internal audit caught the inconsistencies and the Central Bureau of Investigation (CBI) booked the officials in 2020. The case is still under investigation, years later.

Despite these red flags, the KCC scheme rolls on without systemic accountability, but insiders say even scrubbing the system clean of fraud won’t fix what’s fundamentally broken.

“This isn’t a debt crisis—it’s a crisis of dignity,” says Dharmendra Malik, national spokesperson for the Indian Farmers’ Union. “You can’t fight agrarian despair with plastic credit cards. What farmers need is investment in irrigation, assured crop prices, warehousing, and education—not loans disguised as lifelines.”

The view from the field reflects that hollow truth; every harvest now follows a predictable script: brown fields, drying cane, unpayable bills, and many asking is farming even sustainable anymore?