Farm Without Fear: RBI Increases Threshold Limit For Collateral-Free Loans For Farmers By 60 Per Cent To Rs 1.6 Lakh

The Reserve Bank of India (RBI) has raised the threshold limit for collateral-free agricultural loans to Rs 1.6 lakh from the current Rs 1 lakh.

The new policy decision, announced today (7 February), aims to help small and marginal farmers to avail larger loans without having to present an asset as collateral.

Presently the banks are mandated to extend collateral-free agricultural loans up to Rs 1 lakh. This limit of ₹ 1 lakh was fixed in the year 2010.

Keeping in view the overall inflation and rise in agricultural input costs since then, it has been decided to raise the limit for collateral­–free agricultural loans from Rs 1 lakh to Rs 1.6 lakh. This will enhance coverage of small and marginal farmers in the formal credit system. The circular to this effect will be issued shortly,” said an RBI release.

Farm credit in India has grown consistently over the years, exceeding targets set in the respective budgets. Rs 11.68 lakh crore was given as credit to farmers in 2017-18, higher than the Rs 10 lakh crore target set for that year. Agri-loans worth Rs 10.66 lakh crore were disbursed in the 2016-17 fiscal, higher than the target of Rs 9 lakh crore. The target for 2018-19 fiscal stands at Rs 11 lakh crore.

Working Group to Review Agricultural Credit

Despite the growth in agri-credit, issues like regional disparity, the extent of coverage, etc remain. There is also the issue of deepening long-term agricultural credit for capital formation. Thus, RBI has constituted an Internal Working Group (IWG) to review agricultural credit in India.

Also Read: Modi’s Rejection Of Farm Loan Waivers Should Be The Start Of A New Realism