In a significant move aimed at supporting India’s agricultural sector, the Reserve Bank of India (RBI) has mandated that all banks waive collateral, mortgage, and margin requirements for agricultural loans up to Rs.2 lakh. This decision, set to take effect from January 2025, is designed to ease the financial burden on farmers who rely on loans to meet cultivation costs.
Under the new rule, agricultural loans, including those for allied activities, will be granted without the need for collateral for amounts up to Rs.2 lakh per borrower. This policy change comes in response to rising inflation and increasing agricultural input costs, with the RBI raising the previous limit of Rs.1.6 lakh to Rs.2 lakh.
The RBI’s move aligns with the government’s priority-sector lending framework, which classifies agricultural credit as essential for farmers. This credit is crucial, as nearly 50% of India’s population depends on farm-related income, contributing significantly to the nation’s GDP, which agriculture accounts for 18%.
In 2019, the RBI had already raised the collateral-free loan limit from Rs.1 lakh to Rs.1.6 lakh, and this new adjustment continues the trend of supporting farmers in their financial needs. The central bank’s directive to all commercial and cooperative banks ensures that the farming community can access the required credit with minimal hurdles.
Additionally, as per RBI’s guidelines, 40% of the total credit extended by scheduled banks must be directed toward priority sectors, including agriculture, to ensure sustained support for India’s farming population.
 has mandated that all banks waive collateral, mortgage, and margin requirements for agricultural loans up to Rs.2 lakh. This decision, set to take effect from January 2025, is designed to ease the financial burden on farmers who rely on loans to meet cultivation costs.){kind=link}