Virendra Pandit
New Delhi: The Reserve Bank of India (RBI) has enhanced the collateral-free loan limit for farmers from Rs 1.6 lakh to Rs 2 lakh, effective January 1, 2025, ahead of the next crop season, the media reported on Saturday.
This important move will bring relief to small and marginal farmers amid rising input costs, including seeds and fertilizers.
Days after the new RBI Governor, Sanjay Malhotra, took charge, this directive instructed banks nationwide to waive collateral and margin requirements for agricultural and allied activity loans up to Rs 2 lakh per borrower.
According to the Union Agriculture Ministry, the key decision came in response to the rising input costs and the need to improve credit accessibility for farmers.
“This measure will significantly benefit over 86 percent of farmers who are small and marginal landholders,”, it said.
Banks have been directed to implement the guidelines swiftly and ensure widespread awareness about the new loan provisions.
The move will facilitate easier access to Kisan Credit Card (KCC) loans and complement the government’s Modified Interest Subvention Scheme (MISS), which offers loans up to Rs 3 lakh at a 4 percent effective interest rate.
The MISS offers farmers short-term agricultural loans at a subsidized interest rate. The scheme is a variant of the Interest Subvention Scheme (ISS), which began in 2006-2007.
The fresh initiative is seen as a strategic step to enhance financial inclusion in the agricultural sector, providing farmers with much-needed financial flexibility to invest in agricultural operations and improve their livelihoods.
Agriculture experts view the initiative as a critical step towards enhancing credit inclusivity and supporting agricultural economic growth, addressing inflationary pressures on farming input costs.