The Reserve Bank of India (RBI) has announced an increase in the limit for collateral-free agricultural loans, raising it from Rs 1.6 lakh to Rs 2 lakh per borrower, effective from January 1, 2025.

This move, according to the Ministry of Agriculture and Farmers Welfare, is designed to help address rising input costs and the financial challenges farmers face, particularly amidst inflationary pressures on agricultural inputs.

Under the new policy, farmers can access loans for agricultural activities, including allied sectors, without the need for collateral or margin requirements.

The RBI has instructed banks across the country to implement the revised guidelines quickly, ensuring timely financial assistance for farmers. Furthermore, banks have been urged to widely publicize the changes to ensure that farmers and stakeholders are fully informed about the updated loan provisions.

This move is expected to provide enhanced financial access to small and marginal farmers, who represent over 86% of the agricultural sector.

With collateral-free loans, farmers will no longer face the burden of offering assets as security to secure credit. This is anticipated to reduce borrowing costs and make it easier for farmers to invest in their agricultural operations, boosting productivity and livelihoods.

In addition to the collateral-free loan limit, the RBI’s policy will likely increase the uptake of Kisan Credit Card (KCC) loans, enabling farmers to meet their operational and developmental needs.

The initiative also complements the Modified Interest Subvention Scheme, which offers loans up to Rs 3 lakh at an effective interest rate of 4 per cent.

This combined approach strengthens financial inclusion in the agricultural sector, supports sustainable farming practices, and aligns with the government’s long-term vision for enhancing agricultural growth and economic resilience. (With ANI inputs)