Mumbai
The Reserve Bank of India has increased the limit of collateral free agricultural loan from Rs 1.6 lakh to Rs 2 lakh. Through this, the government’s effort is to provide benefits to small and marginal farmers. Additionally, to ensure financial inclusion, the Central Bank has permitted Small Finance Banks to offer pre-approved credit lines through UPI. Both these decisions were announced by RBI after Friday’s MPC. Earlier this limit for collateral free agricultural loan was Rs 1.60 lakh, which was fixed in 2019. Earlier this limit was Rs 1 lakh in 2010.
RBI said in a statement that keeping in mind the overall inflation since then and the increase in agricultural input costs, it has been decided to increase the limit of agricultural loans without collateral from Rs 1.6 lakh to Rs 2 lakh. This will increase the coverage of small and marginal farmers in the formal credit system. Its circular will be issued soon.
To ensure greater financial inclusion, RBI has also decided to allow Small Finance Banks (SFBs) to provide pre-approved credit lines through UPI. The scope of UPI was expanded in September 2023. This allows pre-approved credit lines to be linked through UPI. Earlier only commercial banks were allowed to issue pre-approved credit lines through UPI. Payments banks, SFBs and regional rural banks were kept out of this scope.
“The Line of Credit on UPI has the potential to provide low-ticket, short-term loans to new customers,” RBI said. “SFBs work on a high-tech, low-cost model to reach customers and this will help in increasing the reach.”
