RBI Raises Collateral-Free Loan Limit To Rs 2 Lakh For Farmers Starting Jan 1, 2025

Banks have been directed to implement the new guidelines promptly and ensure widespread awareness about the updated loan provisions

Agriculture experts see this as a crucial step in improving credit accessibility and promoting economic growth within the agricultural sector

Source : PTI

The Reserve Bank of India (RBI) has raised the collateral-free loan limit for farmers from Rs 1.6 lakh to Rs 2 lakh, effective January 1, 2025. This decision is designed to provide better financial support to small and marginal farmers facing increasing input costs.

The new directive mandates that banks across the country waive collateral and margin requirements for loans up to Rs 2 lakh per borrower for agricultural and allied activities.

The agriculture ministry stated that the decision is a response to increasing input costs and aims to enhance credit accessibility for farmers. "This measure will significantly benefit over 86 per cent of farmers who are small and marginal landholders," the statement added.

Banks have been directed to implement the new guidelines promptly and ensure widespread awareness about the updated loan provisions. This move is designed to streamline access to Kisan Credit Card (KCC) loans, making it easier for farmers to obtain financial support. It also complements the government’s Modified Interest Subvention Scheme, which offers loans up to Rs 3 lakh at a favourable 4 per cent effective interest rate.

The initiative is regarded as a key step in fostering financial inclusion within the agricultural sector, offering farmers much-needed flexibility to invest in their operations, enhance productivity, and ultimately improve their livelihoods. By addressing inflationary pressures on farming input costs, this measure seeks to ease the financial burden on small and marginal farmers, who comprise a significant portion of India’s farming community.

Agriculture experts see this as a crucial step in improving credit accessibility and promoting economic growth within the agricultural sector. The initiative is expected to improve farmers' financial stability and support the long-term sustainability and development of India's agricultural economy.

During the December monetary policy meeting, former RBI governor Shaktikanta Das announced that the central bank has proposed to increase the collateral-free loan limit for farmers.