RBI Increases Collateral-Free Agricultural Loan Limit from ₹1.6 to ₹2 Lakh

In a significant move to support the agricultural sector and address rising input costs, the Reserve Bank of India has announced an increase in the limit for collateral-free agricultural loans, including loans for allied activities. The existing loan limit of ₹1.6 lakh per borrower has been raised to ₹2 lakh.

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.

Effective January 1, 2025, banks across the country are instructed to:

• Waive collateral security and margin requirements for agricultural loans, including loans for allied activities, up to ₹2 lakh per borrower.
• Expeditiously implement the revised guidelines to ensure timely financial assistance to the farming community.
• Banks are instructed to provide widespread publicity to these changes to ensure maximum outreach and awareness among farmers and stakeholders of their operational area.

This move enhances credit accessibility, particularly for small and marginal farmers (over 86% of the sector), who benefit from reduced borrowing costs and the removal of collateral requirements. By streamlining loan disbursement, 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 4% 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.