RBI raises collateral-free agricultural loan limit to ₹2 lakh
The Reserve Bank of India raised the limit for collateral-free agricultural loans, including loans for allied activities, from ₹1.6 lakh to ₹2 lakh per borrower, effective 1 January 2025.
Summary
The Reserve Bank of India (RBI) has raised the limit for collateral-free agricultural loans, including loans for allied activities, from ₹1.6 lakh to ₹2 lakh per borrower, the Agriculture Ministry said on 14 December 2024. From 1 January 2025, banks must waive collateral security and margin requirements for such loans up to ₹2 lakh per borrower and give the change wide publicity. The move acknowledges inflation and rising input costs, and is expected to benefit small and marginal farmers, who make up over 86% of the sector, and increase the uptake of Kisan Credit Card loans. Combined with the Modified Interest Subvention Scheme, which offers loans up to ₹3 lakh at a 4% effective interest rate, it aims to strengthen financial inclusion in agriculture.
Key facts
- Old limit
- ₹1.6 lakh per borrower
- New limit
- ₹2 lakh per borrower
- Effective
- 1 January 2025
- Covers
- Agricultural loans, including loans for allied activities
- Small and marginal farmers
- Over 86% of the sector
- MISS
- Loans up to ₹3 lakh at 4% effective interest rate
Practice MCQs 3 questions
In December 2024, the RBI raised the limit for collateral-free agricultural loans per borrower to:
Show answer
Correct answer: B — ₹2 lakh
PIB (Agriculture): the existing collateral-free agricultural loan limit of ₹1.6 lakh per borrower has been raised to ₹2 lakh, effective 1 January 2025.
Consider the following statements about the RBI's revised collateral-free agricultural loan limit: 1. The limit also applies to loans for allied activities. 2. The revised limit is effective from 1 April 2025. 3. The Modified Interest Subvention Scheme offers loans up to ₹3 lakh at a 4% effective interest rate. Which of the statements given above are correct?
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Correct answer: C — 1 and 3 only
PIB (Agriculture): the limit covers agricultural loans including allied activities, and the MISS offers loans up to ₹3 lakh at a 4% effective rate. Statement 2 is incorrect: the change is effective from 1 January 2025.
Small and marginal farmers, expected to benefit most from the RBI's December 2024 increase in the collateral-free agricultural loan limit, make up over what share of the farm sector?
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Correct answer: D — 86%
The Agriculture Ministry said the move would benefit small and marginal farmers, who make up over 86% of the sector.