The Reserve Bank of India (RBI) has raised the limit for lending collateral-free agri loans to farmers from Rs 1.6 lakh to Rs 2 lakh, the regulations of which will come into effect from January 1, 2025.
Considering rising input costs and inflation, the RBI has been raising the limit for disbursing collateral-free agricultural loans since.
The collateral-free agricultural loan limit was Rs 10,000 in 2004. Currently, it is at Rs 1.6 lakh which will increase to Rs 2 lakh from January.
As per their mandate, banks are not supposed to seek collateral for agricultural loans for the loan limits set by it. However, there have been claims otherwise. This has resulted in many farmers taking hand loans from private individuals at higher interest rates.
To support small and marginal farmers who form 86% of the farmers in the country, the Union ministry of agriculture and farmers’ welfare has sought more contributions from the RBI in the form of collateral-free loans.
The ministry has informed the RBI to implement the new regulations swiftly and spread awareness among the farmers about the increased loan limit.
The collateral-free agricultural loans could be availed by farmers to purchase seeds and other agricultural inputs, to grow vegetables and other horticultural crops, to raise poultry dairy and other livestock, and for building godowns to store their produce.
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