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. The move aims to provide financial relief to small and marginal farmers by waiving collateral and margin requirements for agricultural loans up to Rs 2 lakh, addressing rising input costs and improving access to credit.
The agriculture ministry has welcomed the RBI’s decision, highlighting that over 86 per cent of India’s farmers are small and marginal landholders who will directly benefit from the increased loan limit. The move is expected to reduce financial burdens and improve access to funds for essential farming activities, allowing farmers to invest in crops, equipment, and other operational needs.
Banks have been instructed to implement the new guidelines promptly and ensure widespread awareness among farmers about the updated loan provisions. This initiative is viewed as a vital step towards enhancing financial inclusion in the agricultural sector, especially given the rising inflationary pressures on inputs like seeds, fertilizers, and pesticides.
The policy change is also expected to complement the government’s Modified Interest Subvention Scheme, which offers loans up to Rs 3 lakh at a 4 per cent effective interest rate. Experts suggest that this move will not only improve financial access but also enhance the impact of Kisan Credit Card (KCC) loans, providing farmers with greater flexibility and affordability in managing their agricultural finances.
Agriculture experts view the RBI’s decision as a timely intervention to support agricultural economic growth, particularly as rising costs continue to challenge the viability of farming. The initiative is expected to strengthen the overall credit ecosystem for farmers and contribute to improving livelihoods in rural areas.
(With PTI Inputs)