What changed
The credit limit for advances against pledge/hypothecation of agricultural produce (including warehouse receipts) was increased from Rs 5 lakh to Rs 10 lakh. This change applies to loans with a maturity not exceeding 12 months and continues to qualify as direct agricultural advances under priority sector lending.
What it means for you
Banks can now offer larger post-harvest credit to farmers, supporting better price realisation and reducing distress sales. The higher limit opens up more business opportunities in agricultural finance while still counting toward priority sector targets.
What you must do
- Update internal lending policies and product documentation to reflect the new Rs 10 lakh limit for produce marketing loans.
- Train field staff and credit officers on the enhanced limit and its classification as direct agricultural advance.
- Proactively reach out to farmers and farmer producer organisations to promote the expanded scheme.
- Monitor disbursement trends to ensure credit flow to agriculture increases as urged by RBI.
Who it affects
All scheduled commercial banks including RRBs and Local Area Banks, Farmers availing produce marketing loans, Agricultural credit officers and branch managers
What is the maximum tenure for these loans?
The loan period must not exceed 12 months, as per the existing priority sector guidelines.
Does this change affect classification under priority sector?
No, these advances continue to be treated as direct agricultural advances under priority sector lending.