Collateral-Free Agricultural Loan limit raised to Rs 1.6 Lakh

In order to help small and marginal farmers get access to credit, The Reserve Bank of India raised the limit of collateral-free agricultural loans to Rs 1.6 lakh from the existing Rs 1 lakh, on Thursday. 

The Central Bank plans to set up an internal working group (IWC) for reviewing agriculture credit and creating a workable policy solution. 

Considering the overall inflation leading to a hike in input costs, the limit for collateral-free loans has been raised. “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.” 

While announcing the formation of ICW, RBI said that there is issue of deepening long term agricultural credit for capital formation. 

Agricultural credit growth has been significant over the years. However, RBI acknowledged that problems like regional disparity and extent of coverage exist in the country. The IWG has plans to draft workable solutions for credit culture in the country. 

The other major monetary policy changes include the cut in repo rate by 0.25% to 6.25% and the reverse repo rate to 6%. The GDP growth is projected to accelerate at 7.4% in the next fiscal as against 7.2% in 2018-19. The definition of bulk deposits is to be revised to Rs 2 crore and above from the current Rs 1 crore. The statement removes restrictions on Foreign Portfolio Investors investing in corporate debt market. There shall be guidelines to harmonize different Non-Banking Financial Institutions in near future.  The next meeting of the Monetary Policy Committee shall be held from April 2 to 4.