RBI increases limit on unsecured agricultural loans to Rs 1.6 lakh
To increase liquidity in the agricultural sector, especially among small and marginal farmers, the RBI on Thursday announced the increase of the limit on unsecured agricultural loans to Rs 1.6 lakh from Rs 1 lakh.
In 2010, the unsecured limit for crop loans and term loans was increased from Rs 50,000 to Rs 1 lakh.
The RBI said the measure had been taken “taking into account headline inflation and rising farm input costs” since 2010. “This will improve coverage of small and marginal farmers in the formal credit system. “said the RBI. It also decided to create an internal working group to review agricultural credit and address issues such as regional disparities and extent of coverage, among others.
The government disbursed over 11 trillion rupees in agricultural loans until mid-December 2018, much of which – nearly 50% – has been taken over by Tamil Nadu, Andhra Pradesh, Uttar Pradesh , Punjab, Rajasthan and Maharashtra. In large states, such as Uttar Pradesh, data shows that there are large regional disparities in the use of institutional credit.
“This will improve the liquidity of the system and allow farmers to invest more,” said Shiraz Hussain, former secretary of agriculture.
But with banks facing the problem of non-performing assets (NPAs) spiraling, increasing the limit on unsecured loans for the agricultural sector could hurt them further.
“Raising the limit was essential for farmers, as support prices and input costs increased. I don’t see this move leading to an increase in NPAs, ”said Mrutyunjay Mahapatra, MD and CEO of Syndicate Bank.
The Indian Banks Association (IBA) earlier this month issued a notice to all banks to waive processing, documentation, inspection, general ledger folio and all other fees. service for loans taken on Kisan credit cards (KCC) and crop loans up to Rs 3 lakh.
The government also decided to launch a campaign to bring more farmers into the KCC fold with the help of the banks.
The country has around 6.95 crore in KCC, while the total number of farm households is estimated to be around 14 crore.