RBI raises collateral-free farm loan limit to Rs 1.6 lakh

The Reserve Bank of India (RBI) raised the limit of collateral-free agricultural loans to Rs 1.6 lakh from the current Rs 1 lakh with a view to help small and marginal farmers.

The central bank also decided to set up an internal working group (IWG) to review agricultural credit and arrive at a workable policy solution.

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.

Currently, the banks are mandated to extend collateral-free agricultural loans up to Rs 1 lakh.

This limit was fixed in the year 2010.

"Keeping in view the overall inflation and rise in agriculture input costs since then, it has been decided to raise the limit for collateral free agriculture loans from Rs 1 lakh to Rs 1.6 lakh.

"This will enhance coverage of small and marginal farmers in the formal credit system," said the central bank's 'Statement on Developmental and Regulatory Policies'.

A circular in this regard will be issued shortly, it added.