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RBI increases limit of collateral-free agricultural loans to Rs 1.6 lakh

08 Feb 2019 Evaluate

With an aim to help small and marginal farmers, the Reserve Bank of India (RBI) has increased the limit of collateral-free agricultural loans to Rs 1.6 lakh from the current limit of Rs 1 lakh. Earlier, in 2010, the collateral-free limit for crop loans and term loans was hiked to Rs 1 lakh from Rs 50,000.

Keeping in view the overall inflation and rise in agriculture input costs since then, the RBI has decided to raise the limit for collateral-free agriculture loans to Rs 1.6 lakh. The central bank in its ‘Statement on Developmental and Regulatory Policies’ said this will enhance coverage of small and marginal farmers in the formal credit system. It added that a circular in this regard will be issued shortly. The apex bank further said agricultural credit growth has been significant over the years. In spite of this, there remain issues related to agricultural credit such as regional disparity and the extent of coverage, among others.

In order to review agricultural credit and arrive at a workable policy solution, the central bank also decided to set up an internal working group (IWG). The IWG will examine issues related to agricultural credit and arrive at workable solutions and policy initiatives. Besides, the Union Budget had also announced measures to boost the farming sector in addition to annual payment of Rs 6,000 to small and marginal farmers.

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