A regional rural bank in India on Sept. 29 launched a trial to test a new mobile-based version of India’s Kisan credit card, which farmers use to buy equipment and products such as fertilizer and seeds at a lower interest rate.
Pallavan Grama Bank Pvt. Ltd. is conducting the pilot in the district of Villupuram in Tamil Nadu, a bank spokesperson tells PaymentsSource.
“Pallavan Grama is the first bank to launch such a service,” he says. “We are backed by the National Bank for Agriculture and Rural Development for this pilot, which would run for a period of six months at a minimum.”
During the pilot, participating farmers will use their mobile phones when purchasing equipment or farm inputs instead of their actual payment cards, according to the spokesperson. Business correspondents, who will represent the banks in the villages and go door to door, also will offer farmers cash payments and withdrawals through text-message exchanges between the two parties, he says.
Proponents expect the service to reduce costs for banks that otherwise would have to send business correspondents to farms and for farmers that otherwise might have to visit a branch to secure a cash advance.
Select merchants registered with Paymate India Pvt. Ltd., a Mumbai-based third party payments provider, also may accept payments using the service for purchases of farming inputs.
Technology from Paymate uses text messaging and can support any handset and mobile operator.
Farmers must register their Kisan card to their mobile number. To initiate transactions, they send a four-digit PIN they will receive after registration to a dedicated number in a text message to authorize a transaction.
PayMate then sends a transaction code to the farmer’s mobile phone. The farmer presents the code to a registered merchant, which enters it into a payment terminal to verify the transaction and receive the payment.
When making cash withdrawals with a business correspondent, the user will follow a similar process to get a code from Paymate, which he will present to correspondent to confirm the transaction and receive cash.
Rural and cooperative banks in various regions of India provide the Kisan credit cards based on farmers’ land holdings so they may buy agricultural supplies such as seed, fertilizer and pesticides. Kisan cardholders also may secure cash advances for farming-related purchases.
Farmers must repay their Kisan card loans within three years, and they may make any number of cash advances and purchases within a fixed limit based on the scale of their farm operations. They must pay back cash advances within 12 months. The cards impose annual interest rates of less than 5%.
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