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RBI Boosts Rural Credit: ₹2 Lakh Loan Limit for Farmers
30 Mar
Summary
- RBI ensures sufficient banking liquidity for economic and rural needs.
- Collateral-free agri loans rise to ₹2 lakh starting January 2025.
- Priority Sector Lending targets agriculture and small farmers.
The Reserve Bank of India (RBI) actively manages banking system liquidity to meet the economy's productive requirements, with a particular focus on the rural sector. The government has implemented measures to ensure continuous credit flow for rural development and self-help groups (SHGs).
Key policy tools, including RBI's Priority Sector Lending (PSL) guidelines and government-set Ground Level Agriculture Credit (GLC) targets, are instrumental in expanding Kisan Credit Card (KCC) coverage and increasing institutional credit for farmers.
Under current PSL guidelines, commercial banks must allocate at least 18% of their Adjusted Net Bank Credit (ANBC) to agriculture. A sub-target of 10% is specifically for Small and Marginal Farmers (SMFs). The RBI also employs incentives and disincentives for districts to promote equitable credit distribution.
Effective January 1, 2025, the RBI has raised the limit for collateral-free short-term agricultural loans, encompassing allied activities, from ₹1.60 lakh to ₹2.00 lakh per borrower. This move aims to further support agricultural credit accessibility. Additionally, concessional refinance is provided to eligible Rural Financial Institutions through various funds to manage PSL shortfalls.
