What changed
The limit for collateral-free agricultural loans, including allied activities, has been raised from ₹1.6 lakh to ₹2 lakh per borrower. Banks are directed to implement this change by January 1, 2025, and give it adequate publicity.
What it means for you
This move eases credit access for small and marginal farmers by reducing their need to pledge assets. Banks will see a slight increase in unsecured agri loan exposure, but the higher limit aligns with rising input costs and inflation.
What you must do
- Update internal loan policies to reflect the new ₹2 lakh collateral-free limit for agricultural loans.
- Ensure all branches implement the change by January 1, 2025.
- Communicate the revised limit to customers through notices, SMS, and digital channels.
- Train loan officers on the updated waiver of collateral and margin requirements.
Who it affects
All Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, State Co-operative Banks, District Central Co-operative Banks, Farmers and borrowers of agricultural loans
Does the ₹2 lakh limit apply to loans for allied activities like dairy or fisheries?
Yes, the circular explicitly includes loans for allied activities under the enhanced collateral-free limit.
When must banks start applying the new limit?
Banks must implement the revised instructions by January 1, 2025, and are advised to do so expeditiously.