MUMBAI, – India’s central bank said on Friday it will raise the limit for collateral-free agriculture loans to 200,000 rupees ($2,364.15) in a bid to enhance access to formal credit for small and marginal farmers in the country.
Banks were required to extend collateral-free agriculture loans up to 160,000 rupees per borrower.
The decision was taken “in view of the overall inflation and rise in agricultural input costs,” the Reserve Bank of India said in a statement on developmental and regulatory policies. A circular to this effect will be issued shortly, it added.
Annual retail inflation in India surged past the RBI’s 6% tolerance ceiling in October, driven by soaring food prices.
Inflation hurts small farmers by increasing their input costs, reducing purchasing power, and raising the cost of living.
Separately, the central bank has also proposed to permit small finance banks to extend pre-sanctioned credit lines through the Unified Payments Interface, India’s home-grown real-time payments system.
($1 = 84.5970 Indian rupees) (Reporting by Siddhi Nayak; Editing by Janane Venkatraman)
