The Reserve Bank of India (RBI) has increased the limit for agriculture loans without any collateral per borrower from Rs 1.6 lakh to Rs 2 lakh. The move is aimed at improving access to credit for small and marginal farmers.
The change, announced during the Monetary Policy Committee (MPC) meeting on December 6, is expected to address the financial challenges faced by farmers by helping them access loans without any collateral.
The increased loan limit is a step towards increasing the affordability and accessibility of agriculture financing. This decision by the RBI is being seen as a positive development for the agriculture sector, especially to help small-scale farmers secure the funds needed for development and growth.
By removing the requirement of security, the central bank hopes to reduce the financial burden on this demographic and encourage more banks to lend to the agriculture sector. This policy change is in line with RBI’s broader goal of promoting financial inclusion.
In another significant move, RBI has made adjustments to the norms for foreign currency non-resident (FCNR) deposits. Banks will now be allowed to offer FCNR deposits with maturity periods ranging from less than one to three years at a higher interest limit of Overnight Alternative Reference Rate (ARR) + 400 basis points.
This represents an increase from the previous limit of ARR + 200 basis points. The move is aimed at attracting more foreign currency inflows, thereby encouraging non-resident Indians (NRIs) to invest in the country’s banking system.
These measures by RBI are part of its broader strategy to strengthen rural financing as well as boost foreign currency deposit inflows. As the global economic scenario evolves, these changes will help improve the liquidity position of Indian banks and provide a much-needed boost to the agriculture and foreign exchange sectors.