Significant initiative to boost the agricultural sector and address rising input costs, the Reserve Bank of India (RBI) has raised the limit for collateral-free agricultural loans, including loans for allied activities, to ₹2 lakh. Previously, this limit was set at ₹1.6 lakh. This decision comes in response to the growing impact of inflation and the escalating costs of agricultural inputs on farmers. The objective is to ensure farmers have sufficient financial resources to meet their farming and developmental needs without the need for providing collateral.
Banks across the country have been instructed to:
This move is expected to benefit small and marginal farmers, who constitute 86% of the farming community. By eliminating the need for collateral, the initiative will reduce borrowing costs and improve access to credit for these farmers. It will enable them to secure loans more easily, invest in agricultural operations, and enhance their livelihoods.
The streamlined process is also likely to increase the adoption of Kisan Credit Card (KCC) loans, ensuring broader financial inclusion. Additionally, under the Modified Interest Subvention Scheme, loans up to ₹3 lakh will be available at an effective interest rate of just 4%. This policy not only strengthens financial support for farmers but also reinforces the agricultural sector as a whole. It aligns with the government’s long-term vision of sustainable agriculture while fostering inclusive economic growth.
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