This will enhance coverage of small and marginal farmers in the formal credit system.
The Reserve Bank of India enhanced the collateral-free agriculture loans limit to Rs 2 lakh per borrower from the existing Rs 1.6 lakh. At present, banks are required to extend collateral-free agriculture loans up to Rs 1.6 lakh per borrower. This limit was enhanced from Rs 1 lakh, set in the year 2010 to Rs 1.6 lakh in the year 2019. Keeping in view the overall inflation and rise in agricultural input costs since then, it has been decided to raise the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh, RBI stated in its monetary policy statement on developmental and regulatory policies. This will enhance coverage of small and marginal farmers in the formal credit system. The enhanced limit also applies to loans for allied agricultural activities, according to the RBI.
Shaktikanta Das, Governor, in his address after the completion of the Monetary Policy Committee (MPC) meeting mentioned, “Taking into account the rise in agricultural input costs and overall inflation, it has been decided to increase the limit for collateral-free agriculture loans from rupees 1.6 lakh to rupees 2 lakh per borrower; this will further enhance credit availability for small and marginal farmers.”
The apex bank will issue a separate circular to notify the enhancement scheme of the collateral-free loan shortly. A collateral-free business loan is a financing system where the farmers do not need to pledge assets as security for getting loans. The last time the limit for collateral free agriculture loans was revised in 2019 by the central bank, when it was raised from Rs. 1 lakh to Rs. 1.6 lakh.
