ARJAVA MEDIA:
The decision will enhance credit accessibility for small and marginal farmers, who constitute over 86% of the sector.
The Reserve Bank of India (RBI) instructed commercial banks to support the agricultural sector and address the farmers’ rising input costs by raising the limit of collateral-free agricultural loans, including loans for allied activities to ₹2 lakh from the existing limit of ₹1.6 lakh per borrower. This decision acknowledges the impact of inflation and the increasing cost of agricultural inputs on farmers. It aims to provide enhanced financial access to farmers, ensuring they have sufficient resources to meet their operational and developmental needs without the burden of providing collateral.
The instructions, which include waiver of collateral security and margin requirements for agricultural loans, including loans for allied activities up to ₹2 lakh per borrower, will be effective January 1, 2025. RBI also instructed banks to expeditiously implement the revised guidelines to ensure timely financial assistance to the farming community. Banks will provide widespread publicity to these changes to ensure maximum outreach and awareness among farmers and stakeholders of their operational area.
The decision will enhance credit accessibility for small and marginal farmers, who constitute over 86% of the sector. The initiative is expected to increase the uptake of Kisan Credit Card (KCC) loans, allowing farmers to invest in agricultural operations and improve their livelihoods. Combined with the Modified Interest Subvention Scheme, offering loans up to ₹3 lakh at a four per cent effective interest rate, this policy strengthens financial inclusion, supports the agricultural sector, and fosters credit-driven economic growth, aligning with the government’s long-term vision for sustainable agriculture.
