RBI extends bail-free farm credit limit from 1 lakh to 1.6 lakh

In view of the government announcing direct income support of 6,000 per year for small and marginal farmers in the interim budget on 1st February, the Reserve Bank of India increased the limit of collateral-free agricultural credit to Rs 1.6 lakh from Thursday, 1 lakh Gave.

The central bank said that the increased limit will increase the coverage of small and marginal farmers in formal credit system. Circular of this effect will be issued shortly. 

Currently, it is mandatory for banks to expand the collateral-free agricultural loan up to Rs 1 lakh. This limit of Rs 1 lakh was fixed in 2010. 
Since then, keeping in view the overall inflation and the increase in agricultural input costs, it has been decided to increase the limit of free-of-cost farm credit to Rs. 1.6 lakh from lakhs. 

In order to provide assured income support to small and marginal farmers, the government said that it will start the program of Prime Minister Kisan Adhash Nidhi (PM-KISAN). Under this, direct income support will be provided at the rate of 6,000 per annum for farmers and families with cultivable land having two hectares of land.

This income assistance will be transferred directly into bank accounts of beneficiary farmers in three equal installments of 2,000. The program will be funded by the Government of India. 

In his interim budget speech, Finance Minister Piyush Goyal had said that around 12 crore small and marginal farmers and families are expected to benefit from this. The program will be effective from December 1, 2018, and the first installment will be paid till March 31, 2019. In this program, annual expenditure of 75,000 crore will come. 

Agricultural credit growth has been important in the past few years, the RBI saw that despite this, there are issues related to agricultural credit, such as regional inequality and coverage limits. There is still the issue of deepening long-term agricultural credit for capital formation.

An Internal Work Group (IWG) has been constituted for RBI to review the agricultural debt and to review the issues and access to practical solutions and policy initiatives. 

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