In a significant move to support farmers and promote agricultural growth, the Reserve Bank of India (RBI) has raised the limit for collateral-free agricultural loans, including loans for allied activities, from Rs 1.6 lakh to Rs 2 lakh per borrower. This decision reflects the rising inflation and increasing agricultural input costs over the years.
The State Cooperative Banks and District Central Cooperative Banks have been instructed to waive collateral security and margin requirements for such loans up to the new limit, providing farmers with enhanced financial flexibility. The revised guidelines will come into effect on January 1, 2025.
Banks have been directed to implement these changes promptly and ensure widespread awareness among borrowers through adequate publicity measures.
Addressing the media after the conclusion of the Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das stated:
“The limit for collateral-free agriculture loans was last revised in 2019. Taking into account the rise in agricultural input costs and overall inflation, it has been decided to increase the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower.”
He further added: “This will enhance credit availability for small and marginal farmers.”
This step is expected to significantly boost the agricultural sector and reduce the financial burden on farmers across the country.
Collateral-free loans allow farmers to obtain financing without the need to pledge assets as security. The last revision in the limit for collateral-free agricultural loans occurred in 2019, when the RBI raised it from Rs 1 lakh to Rs 1.6 lakh.
Additionally, it is reported that the government has set an ambitious agri-credit disbursement target of Rs 27 lakh crore for commercial banks, cooperative banks, and regional rural banks for the current fiscal year, marking a substantial 37% increase compared to the target for 2023-24.
The Kisan Credit Card (KCC) scheme continues to play a pivotal role in providing timely credit to farmers. As of June 30, 2023, there were over 7.4 crore operative KCC accounts, with a total outstanding credit of Rs 8.9 lakh crore.
