Scale of finance
Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Beyond NCERT
Meaning
The scale of finance is the cost of growing a particular crop on one hectare of land. A district-level technical committee fixes this amount for each crop. Banks use it to set a farmer's crop loan limit, especially under the Kisan Credit Card (KCC). The KCC is a revolving credit limit: the farmer withdraws when needed, repays and withdraws again. The basic rule is: loan limit = scale of finance × farm area. This links the size of the loan to the real cost of cultivation.
Example
Suppose a district committee fixes the scale of finance for paddy. A farmer who grows paddy on twice as much land gets a KCC limit twice as large as a neighbour's.
Don't confuse with
- Collateral-free loan limit: the amount a bank must lend without security, raised by the RBI from ₹1.6 lakh to ₹2 lakh from 1 January 2025. The scale of finance sets how much credit a crop needs, not what security the bank can ask for.