RBI Raises Collateral-Free Agricultural Loan Limit to Boost Credit Flow

Mumbai, Dec 7 (KNN) In a significant step to enhance credit availability for the agricultural sector, the Reserve Bank of India (RBI) has raised the limit for collateral-free agricultural loans to Rs 2 lakh per borrower, up from Rs 1.6 lakh previously.

This move, announced today, is expected to support farmers grappling with rising input costs driven by inflationary pressures.

The decision, outlined in the RBI’s monetary policy statement, emphasises the need for timely access to credit for small and marginal farmers.

 “Keeping in view the overall inflation and rise in agriculture input cost over the years, it has been decided to raise the limit for collateral-free agricultural loans including loans for allied activities from the existing level of Rs 1.6 lakh to Rs 2 lakh per borrower,” the RBI stated.

Governor Shaktikanta Das highlighted the rationale, stating, “Agricultural growth is supported by healthy kharif crop production, higher reservoir levels, and better rabi sowing.

The limit for collateral-free agricultural loans was last revised in 2019. This increase will further enhance credit availability for small and marginal farmers.”

Banks have been directed to implement these changes by January 1, 2025, ensuring that collateral security and margin requirements for agricultural loans up to Rs 2 lakh are waived. They are also instructed to promote awareness of the updated guidelines among stakeholders.

The agriculture sector, a standout performer in the second quarter of the current fiscal, has shown resilience despite subdued growth in other areas like manufacturing and exports.

The RBI’s measure builds on its February 2019 revision, which raised the loan limit from Rs 1 lakh to Rs 1.6 lakh, addressing similar concerns about inflation and rising input costs.

This proactive step is expected to bolster credit flow and provide crucial financial relief to farmers, enabling them to manage escalating costs and sustain productivity.

The move reaffirms the central bank’s commitment to supporting rural and agrarian economies amid broader economic challenges.

(KNN Bureau)