The Reserve Bank of India (RBI) has raised the collateral-free loan limit for farmers from ₹1.6 lakh to ₹2 lakh, effective January 1, in a move to make credit accessible for small and marginal farmers facing rising input costs.

The central bank has directed lenders nationwide to waive collateral and margin requirements for agricultural and allied activity loans up to ₹2 lakh per borrower.

The revised guidelines are expected to benefit over 86 per cent of farmers, who are small and marginal landholders, according to the agriculture.

“This measure will significantly enhance financial inclusion and provide much-needed relief to farmers amid increasing costs of cultivation,” the ministry said in a statement.

Banks have been asked to implement the changes swiftly and ensure broad awareness about the new provisions. The move is also set to facilitate greater access to Kisan Credit Card (KCC) loans, complementing the government’s Modified Interest Subvention Scheme, which offers loans of up to Rs 3 lakh at an effective interest rate of 4 per cent.

While the overall economy of India slowed sharply, to the slowest in nearly two years, in July to September, agriculture was one of the silver linings. The gross domestic product of the farm sector grew faster at 3.5 per cent in those three months compared with 2 per cent in the preceding quarter.