RBI Boosts Financial Access for Farmers with Raised Loan Limits

The RBI has raised the limit for collateral-free agricultural loans from Rs 1.6 lakh to Rs 2 lakh, effective January 2025. This move aims to alleviate financial pressures on farmers, enhance productivity, and increase the uptake of Kisan Credit Card loans, supporting sustainable agricultural growth.

The Reserve Bank of India has announced a significant policy change with an increase in the limit for collateral-free agricultural loans from Rs 1.6 lakh to Rs 2 lakh per borrower, set to be effective from January 1, 2025. This decision, informed by the Ministry of Agriculture and Farmers Welfare, seeks to tackle rising input costs and financial challenges faced by farmers due to inflation.

Under the new policy, farmers engaged in agricultural and allied activities can secure loans without providing collateral or meeting margin requirements. The RBI has mandated banks nationwide to swiftly implement these revised guidelines to ensure immediate financial relief reaches the farmers.

Additionally, banks are instructed to widely publicize these changes, making sure farmers and stakeholders are well-informed. This initiative is expected to significantly enhance financial access for small and marginal farmers, who account for over 86% of the agricultural workforce.

The provision of collateral-free loans alleviates the necessity for farmers to offer security for credit, thus reducing borrowing costs and facilitating investment in agricultural operations. This approach is anticipated to foster increased productivity and bolster livelihoods. Concurrently, the policy is likely to drive the uptake of Kisan Credit Card loans, aiding farmers in addressing both operational and developmental needs.

This policy complements the Modified Interest Subvention Scheme, which provides loans up to Rs 3 lakh at a 4% interest rate, thereby reinforcing financial inclusion within the agriculture sector. The combined strategies are aligned with the government's vision for sustainable farming practices, agricultural growth, and economic resilience. (ANI)

(With inputs from agencies.)