(MENAFN- Live Mint) To ease financial pressures on farmers and address escalating agricultural input costs, the Reserve bank of India (RBI) has raised the collateral-free agricultural loan limit from ₹1.6 lakh to ₹2 lakh. The revised limit, effective from 1 January 2025, is expected to benefit millions of farmers nationwide, the Agriculture Ministry said in a statement on Saturday.
The decision comes as inflationary pressures continue to strain the agricultural sector, where small and marginal farmers-who account for over 86% of the farming community-often struggle to secure credit. By increasing the loan ceiling, the RBI aims to bolster credit access without the burden of collateral, offering a critical lifeline to farmers with limited assets.
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The new limit extends to loans for allied activities, providing farmers with opportunities to diversify income streams. Banks have been directed to waive collateral and margin requirements for loans within the updated threshold, according to the ministry's statement. The RBI has also urged banks to expedite implementation of the revised guidelines to ensure timely assistance for farmers.
To maximize the initiative's impact, banks will launch awareness campaigns targeting farmers and other stakeholders in their operational areas. The focus will be on improving uptake of financial support mechanisms, particularly the Kisan Credit Card (KCC).
This move aligns with government initiatives such as the Modified Interest Subvention Scheme (MISS), which offers loans of up to ₹3 lakh at a subsidized 4% interest rate for prompt payers. Together, these measures are part of a broader strategy to enhance sustainable agricultural practices and boost rural economic growth.
Experts have lauded the RBI's decision as a significant step toward financial inclusion.
For small and marginal farmers , the removal of collateral requirements is transformative, enabling greater confidence and investment in their operations, said Binod Anand, a member of the government's MSP Committee of Agriculture.
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The enhanced credit limit is expected to not only strengthen the agricultural sector but also stimulate rural economic activity.
Mint had reported on 11 December about the government's plans to increase credit limits for farmers , underscoring the urgency of addressing rural financial challenges.
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