In the wake of the government announcing direct income support of ₹6,000 per year for small and marginal farmers in the interim Budget on February 1, the Reserve Bank of India, on Thursday, raised the limit for collateral-free agriculture loans to ₹1.6 lakh from ₹1 lakh.
The central bank said the increased limit will enhance coverage of small and marginal farmers in the formal credit system. The circular to this effect will be issued shortly.
“Presently the banks are mandated to extend collateral-free agriculture loans up to ₹1 lakh. This limit of ₹1 lakh was fixed in 2010.
“Keeping in view the overall inflation and rise in agriculture input costs since then, it has been decided to raise the limit for collateral-free agriculture loans from ₹1 lakh to ₹1.6 lakh,” said the central bank in its Statement on Developmental and Regulatory Policies, which accompanied the 6th Bi-monthly Monetary Policy Statement.
To provide assured income support to small and marginal farmers, the government said it will launch the ‘Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) programme. Under this, vulnerable landholding farmer-families, having cultivable land up to two hectares, will be provided direct income support at the rate of ₹6,000 per year.
This income support will be transferred directly into the bank accounts of beneficiary farmers in three equal instalments of ₹2,000 each. The programme will be funded by the Government of India.
“Around 12 crore small and marginal farmer-families are expected to benefit from this. The programme will be made effective from December 1, 2018, and the first instalment for the period, up to March 31, 2019, will be paid during this year itself. This programme will entail an annual expenditure of ₹75,000 crore,” Finance Minister Piyush Goyal said in his interim Budget speech.
Issues remain
While agricultural credit growth has been significant over the years, the RBI observed that in spite of this, there are issues related to agricultural credit, such as regional disparity and extent of coverage. There is also the issue of deepening long-term agricultural credit for capital formation.
To examine these issues and arrive at workable solutions and policy initiatives, an Internal Working Group (IWG) to review agricultural credit has been constituted by the RBI.
Indian Banks’ Association Chairman Sunil Mehta said the increase in the limit of collateral-free agriculture loans from ₹1 lakh to ₹1.6 lakh will aid farmers to get more credit from formal institutions and is in sync with the pro-farmer policy of the government.