RBI Boosts Collateral-Free Loans for Farmers

The Reserve Bank of India has raised the collateral-free loan limit for farmers from Rs 1.6 lakh to Rs 2 lakh, effective January 1, 2025. This measure is designed to aid small and marginal farmers facing rising input costs by improving credit access and financial inclusion in the agricultural sector.

The Reserve Bank of India (RBI) has announced a significant increase in the collateral-free loan limit for farmers, raising the cap from Rs 1.6 lakh to Rs 2 lakh starting from January 1, 2025. This directive aims to aid small and marginal farmers in overcoming financial hurdles posed by soaring input costs.

The agriculture ministry has emphasized that this decision is crucial, as it allows banks across the nation to waive collateral and margin requirements for agricultural loans up to the new limit. This move is expected to benefit over 86 percent of small and marginal landholders, enhancing their financial access and flexibility.

Banks have been ordered to promptly implement these guidelines and ensure farmers are aware of the new provisions. Enhanced access to loans through Kisan Credit Cards will align with the Modified Interest Subvention Scheme, offering loans up to Rs 3 lakh at a favorable interest rate. Experts see this as an essential step for financial inclusion, supporting economic growth amid inflationary challenges in the farming sector.

(With inputs from agencies.)