Mumbai/New Delhi: The Reserve Bank of India (RBI) today announced an increase in collateral-free agricultural loan limit from ₹1.6 lakh to ₹2 lakh per borrower, effective January 1, 2025.
The move also includes loans for allied activities to support the agricultural sector and is expected to address rising input costs.
This decision acknowledges the impact of inflation and the increasing cost of agricultural inputs on farmers, the Ministry of Agriculture & Farmers Welfare stated. It added that it also aims to provide enhanced financial access to farmers, ensuring they have sufficient resources to meet their operational and developmental needs without the burden of providing collateral.
Effective January 1, 2025, banks across the country are instructed to:
- Waive collateral security and margin requirements for agricultural loans, including loans for allied activities, up to ₹2 lakh per borrower.
- Expeditiously implement the revised guidelines to ensure timely financial assistance to the farming community.
- Banks are instructed to provide widespread publicity to these changes to ensure maximum outreach and awareness among farmers and stakeholders of their operational area.
The RBI decision will enhance credit accessibility, particularly for small and marginal farmers (over 86% of the sector), who benefit from reduced borrowing costs and the removal of collateral requirements. By streamlining loan disbursement, the initiative is expected to increase the uptake of Kisan Credit Card (KCC) loans, allowing farmers to invest in agricultural operations and improve their livelihoods.
Combined with the Modified Interest Subvention Scheme, offering loans up to ₹3 lakh at a 4% effective interest rate, this policy is further expected to strengthen financial inclusion, support the agricultural sector, and foster credit-driven economic growth, aligning with the government’s long-term vision for sustainable agriculture.
– global bihari bureau
