RBI's Big Gift to Farmers: Collateral-Free Loan Limit Hiked to Rs 2 Lakh

New Delhi (The Uttam Hindu): The Reserve Bank of India (RBI) has increased the collateral-free loan limit for farmers from Rs 1.6 lakh to Rs 2 lakh. This decision will be effective from January 1, 2025. The move is aimed at helping small and marginal farmers amid rising input costs. The new directive directs banks across the country to waive the margin requirement for lending for agriculture and allied activities up to Rs 2 lakh per borrower.

According to the Agriculture Ministry, this decision has been taken in view of the rising cost and the need to improve credit accessibility for farmers. The statement said that this measure will greatly benefit more than 86 percent of small and marginal landholder farmers. Banks have been instructed to implement the guidelines promptly and ensure widespread awareness about the new loan provisions.

The move is expected to facilitate easier access to Kisan Credit Card (KCC) loans and will complement the government's revised interest subvention scheme, which provides loans up to Rs 3 lakh at an effective interest rate of 4 per cent. The initiative is being seen as a strategic move to enhance financial inclusion in the agriculture sector, giving farmers the financial flexibility they need to invest in agricultural operations and improve their livelihoods. Agricultural experts consider this initiative by the government and the central bank as an important step towards increasing credit inclusiveness and supporting agricultural economic growth and alleviating inflationary pressures on agricultural input costs.