RBI Raises Collateral-Free Loan Limit for Farmers to ₹2 lakh

December 16, 2024

The Reserve Bank of India (RBI) has announced an increase in the limit for collateral-free loans available to farmers. This change, effective from January 1, aims to support small and marginal farmers facing escalating farming costs.

New Loan Limit Details

The RBI has raised the collateral-free loan limit from ₹1.6 lakh to ₹2 lakh. This adjustment is designed to provide financial relief to farmers who do not own large tracts of land. It is expected that over 86% of farmers will benefit from this increase.

Implementation by Banks

Banks across India have been instructed to offer loans up to ₹2 lakh without requiring collateral or margin money. This directive aims to enhance the accessibility of loans for small landowners, ensuring that they can secure the necessary funds for their farming activities.

The agriculture ministry has brought to light that this initiative will improve financial access for farmers. It is particularly crucial as many farmers face rising costs associated with agriculture. The move is intended to provide much-needed relief during challenging economic conditions.

Kisan Credit Card (KCC) Loans

The new rule simplifies the process for farmers to access Kisan Credit Card (KCC) loans. KCC loans are vital as they provide farmers with the necessary credit for various agricultural activities. The enhanced loan limit will facilitate easier access to these financial products.

Interest Subvention Scheme

This initiative will work in conjunction with the government’s Modified Interest Subvention Scheme. This scheme offers loans up to ₹3 lakh at a reduced interest rate of 4%. The collaboration aims to further support farmers in managing their financial obligations.

Despite a slowdown in the overall economy, the agricultural sector has shown resilience. The farm sector’s GDP grew by 3.5% from July to September, surpassing the 2% growth rate of the previous quarter. This growth puts stress on the importance of supporting farmers through financial initiatives.

GKToday Facts for Exams:
Kisan Credit Card (KCC): KCC is a financial product for farmers. It provides credit for agricultural activities. The card simplifies loan access and supports farmers’ financial needs.
Modified Interest Subvention Scheme: This scheme offers loans at a reduced interest rate. It supports farmers by easing financial burdens. Loans up to ₹3 lakh are available under this initiative.
Collateral-Free Loans: These loans do not require assets as guarantees. They aim to assist small farmers. This initiative enhances financial inclusion and accessibility for land-poor farmers.

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