The Reserve Bank of India (RBI) increased the maximum for collateral-free agricultural loans from Rs 1.6 lakh to Rs 2 lakh in order to alleviate farmers’ financial strains and meet rising agricultural input prices.
According to a statement released by the agricultural ministry on Saturday, millions of farmers across the country are anticipated to gain from the new restriction, which will take effect on January 1, 2025.
Small farmers face difficulties to obtain finance
Small and marginal farmers, who make up more than 86 per cent of the farming population, frequently face difficulties obtaining finance, and the decision comes as inflationary pressures continue to put a burden on the agricultural industry.
The RBI hopes to strengthen credit availability without requiring collateral by raising the lending cap, providing a vital lifeline to farmers with few assets.
Banks been instructed to forego collateral for loans with revised level
The new cap also applies to loans for related businesses, giving farmers the chance to diversify their sources of income. According to the ministry’s announcement, banks have been instructed to forego collateral and margin requirements for loans that fall under the revised level.
In order to provide farmers with prompt support, the RBI has also advised banks to hasten the implementation of the updated rules.
Awareness for Kisan credit card
Banks will start awareness initiatives aimed at farmers and other stakeholders in their operations regions in order to optimise the initiative’s impact. Enhancing the use of financial support tools, especially the Kisan Credit Card (KCC), would be the main goal.
Schemes to improve sustainable farming methods
This action is in line with government programs like the Modified Interest Subvention Scheme (MISS), which provides timely payers with loans up to Rs 3 lakh at a discounted interest rate of 4 per cent. These actions collectively form a larger plan to improve sustainable farming methods and stimulate rural economic development.
