In the wake of NDA government announcing direct income support of ₹6,000 per year for the small farmers in the interim Budget on February 1, the Reserve Bank of India (RBI) has raised the limit of collateral-free agricultural loans to Rs. 1.6 lakh from the current Rs. 1 lakh to help small and marginal farmers.
Further, the RBI has is willing to set up an internal working group (IWG) to review agricultural credit and arrive at a workable policy solution. Currently, the banks are mandated to extend collateral-free agricultural loans up to Rs. 1 lakh.
This limit was fixed in the year 2010. This will enhance coverage of small and marginal farmers in the formal credit system.