The Reserve Bank of India (RBI) has raised the limit for collateral-free agriculture loans from ₹1.6 lakh to ₹2 lakh per borrower in view the overall inflation and rise in agricultural input costs.
This limit was enhanced from ₹1 lakh, set in the year 2010, to ₹1.6 lakh in the year 2019.
“This will enhance coverage of small and marginal farmers in the formal credit system. The circular to this effect will be issued shortly,” Governor Shaktikanta Das said.
According to the Department of Financial Services, the limit of collateral free KCC (Kisan Credit Card) loan was increased from ₹1 lakh to ₹1.6 lakh in February 2019.
KCC loans beyond ₹1.6 lakh and up to ₹3 lakh can be issued without collateral, provided there is a tie-up arrangement through the Tri-Partite Agreement (TPA) among borrower, milk unions & Banks to ensure timely repayment to the Banks.
TPA has been envisaged to ensure payment made by milk union to the dairy farmers through the designated account.