Higher Collateral-Free Loans To Farmers

Mumbai: The Reserve Bank of India (RBI) has decided to raise the limit for collateral-free agriculture loans from Rs1.6 lakh to Rs2 lakh to enhance coverage of small and marginal farmers and permit small finance banks to extend pre-sanctioned credit lines through UPI to small borrowers to ensure greater financial inclusion.

The two decisions were announced after the Monetary Policy meeting held here on Friday.

At present, banks are required to extend collateral-free agriculture loans up to Rs1.6 lakh per borrower. This limit was enhanced from Rs1 lakh, set in the year 2010 to Rs1.6 lakh in the year 2019.

“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 agriculture loans from Rs1.6 lakh to Rs2 lakh. This will enhance the coverage of small and marginal farmers in the formal credit system.