In a significant step to support farmers and address rising input costs, the Reserve Bank of India (RBI) has increased the limit for collateral-free agricultural loans, including loans for allied activities, from Rs. 1.6 lakh to Rs. 2 lakh per borrower.
This move, effective January 1st, 2025, aims to mitigate the impact of inflation and rising agricultural input costs, offering farmers greater financial access without the burden of collateral. The revised guidelines direct banks to:
- Waive collateral security and margin requirements for loans up to Rs. 2 lakh.
- Ensure timely implementation of the changes for seamless financial assistance to farmers.
- Promote awareness of the revised norms among farmers and stakeholders.
The initiative is particularly beneficial for small and marginal farmers, who constitute over 86% of the sector. By removing collateral requirements, it reduces borrowing costs and encourages greater uptake of Kisan Credit Card (KCC) loans, enabling farmers to invest in agricultural operations and enhance their livelihoods.
Coupled with the Modified Interest Subvention Scheme, which provides loans up to Rs. 3 lakh at an effective interest rate of 4%, this policy strengthens financial inclusion, supports the agricultural sector, and aligns with the government’s vision for sustainable, credit-driven economic growth.
