RBI increases limit of unsecured agriculture loan to Rs 2 lakh to help farmers

NEW DELHI New Delhi: The Reserve Bank of India (RBI) has increased the limit of unsecured loans for farmers from Rs 1.6 lakh to Rs 2 lakh, effective from January 1, 2025. The move is aimed at providing support to small and marginal farmers amid rising input costs.The new directive directs banks across the country to waive collateral and margin requirements for agriculture and allied activity loans up to Rs 2 lakh per borrower.

According to the agriculture ministry, the decision has been taken in response to rising input costs and the need to improve access to credit for farmers. “This measure will significantly benefit over 86 per cent of small and marginal landholder farmers,” the statement said.Banks have been directed to swiftly implement the guidelines and ensure widespread awareness about the new loan provisions.

The move is expected to facilitate easier access to Kisan Credit Card (KCC) loans and will complement the government’s revised interest subvention scheme, which provides loans up to Rs 3 lakh at an effective interest rate of 4 per cent. The initiative is being seen as a strategic move to enhance financial inclusion in the agriculture sector, giving farmers the much-needed financial flexibility to invest in agricultural operations and improve their livelihoods.

Agricultural experts see the initiative as a significant step towards enhancing credit inclusion and supporting agricultural economic growth, offsetting inflationary pressures on farming input costs.