RBI raises collateral-free agriculture loan limit to Rs 2 lakh per borrower

The Reserve Bank on Friday enhanced the collateral-free agriculture loans limit to Rs 2 lakh per borrower from the existing Rs 1.6 lakh in view of inflation and rise in farm input costs.

At present, banks are required to extend collateral-free agriculture loans up to Rs 1.6 lakh per borrower.

This limit was enhanced from Rs 1 lakh, set in the year 2010 to Rs 1.6 lakh in the year 2019.

“Taking into account the rise in agricultural input costs and overall inflation, it has been decided to increase the limit for collateral-free agriculture loans from Rs 1.6 lakh to Rs 2 lakh per borrower,” RBI Governor Shaktikanta Das announced while unveiling the December monetary policy.

This, he said will enhance coverage of small and marginal farmers in the formal credit system.

The central bank will soon be issuing a circular giving effect to the announcement.