The move aims to provide enhanced financial access to farmers, ensuring they have sufficient resources to meet their operational and developmental needs without the burden of providing collateral.

Key directives to Banks include

• Enhanced limit for collateral-free agricultural loans, including loans for allied activities, from the existing loan limit of ₹1.6 lakh per borrower to ₹2 lakh.
• Timely implementation (from January 01, 2025) of revised guidelines to ensure swift financial assistance.
• Awareness campaigns to inform farmers and stakeholders of the new directive.

Significance of the Enhanced Limit

• Enhanced Credit Accessibility: Increases access to loans, particularly for small and marginal farmers (over 86% of the sector).
• Streamlined Loan Disbursement: Simplifies the loan process, encouraging higher uptake of Kisan Credit Card (KCC) loans.
• Promotion of Financial Inclusion: Expands formal financial access to the rural farming community and fosters credit-driven economic growth, aligning with the government’s long-term vision for sustainable agriculture.

Key issues in disbursement of Agricultural Credit

• Skewed focus on short-term crop loans, rising fiscal burden due to loan waivers, over-reliance on non-institutional credit, etc.