RBI raises collateral-free agricultural loan limit to Rs 2 lakh

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Chandigarh, December 14

 The Reserve Bank of India (RBI) has increased the limit for collateral-free agricultural loans, including loans for allied activities, from  Rs 1.6 lakh to Rs 2 lakh per borrower. This move is designed to support farmers amid rising input costs and inflation. The RBI’s decision aims to provide greater financial access to farmers, enabling them to meet operational and developmental needs without the burden of collateral. According to the Ministry of Agriculture and Farmers Welfare, from January 1, 2025, banks will be required to waive collateral security and margin requirements for loans up to ₹2 lakh, implement the revised guidelines quickly to ensure timely assistance and publicize the changes widely to ensure awareness among farmers.

This policy is expected to benefit small and marginal farmers, who make up over 86% of the sector, by reducing borrowing costs and eliminating collateral requirements. The initiative is also expected to boost the uptake of Kisan Credit Card (KCC) loans, support agricultural investments, and improve livelihoods. The policy complements the Modified Interest Subvention Scheme, which offers loans up to ₹3 lakh at a 4% effective interest rate, strengthening financial inclusion and promoting sustainable agricultural growth.