RBI Raises Collateral-Free Agricultural Loan Limit to ₹2 Lakh

GG News Bureau
Mumbai, 14th Dec. In a move aimed at supporting India’s agricultural sector amidst rising input costs, the Reserve Bank of India (RBI) has increased the limit for collateral-free agricultural loans, including those for allied activities. The new limit raises the previous threshold from ₹1.6 lakh to ₹2 lakh per borrower.

This decision comes as a response to the growing impact of inflation and the rising costs of agricultural inputs on farmers. It seeks to provide enhanced financial access to farmers, allowing them to meet operational and development needs without the burden of collateral.

Starting January 1, 2025, banks will be instructed to:

• Waive collateral security and margin requirements for agricultural loans up to ₹2 lakh per borrower, including loans for allied activities.
• Implement these revised guidelines swiftly to ensure timely assistance to farmers.
• Promote these changes through wide-reaching publicity to raise awareness among farmers and stakeholders.

The new policy is expected to greatly benefit small and marginal farmers, who make up over 86% of India’s agricultural sector. It will reduce borrowing costs and encourage the use of Kisan Credit Card (KCC) loans, helping farmers invest in agricultural operations and improve their livelihoods.

Additionally, the policy aligns with the government’s efforts to strengthen financial inclusion in the agricultural sector. The Modified Interest Subvention Scheme, which offers loans up to ₹3 lakh at a 4% effective interest rate, complements this move, fostering sustainable agricultural growth and boosting credit-driven economic development.