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RBI Drops Collateral Rule for ₹2 Lakh Farm Loans
The RBI scrapped collateral requirements on farm loans up to ₹2 lakh per borrower. KCC limits now split into sub-limits. Marginal farmers get a Flexi KCC of ₹10,000–₹50,000.
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The Reserve Bank of India told banks to stop demanding collateral on agricultural loans up to ₹2 lakh per borrower. The directive, part of the central bank's latest Kisan Credit Card (KCC) guidelines, also covers loans for allied activities.
Banks can no longer ask for secondary collateral like gold or silver on these smaller advances. If a borrower voluntarily pledges gold, the bank must get a written declaration that the pledge is not required under the rules. The RBI clarified that the collateral-free limit applies only to secondary collateral, not to the asset being financed or primary security.
For loans above ₹2 lakh, banks set their own collateral and margin rules under their credit policy. The RBI made one exception: KCC loans secured against crops or stock with a tie-up for recovery can skip collateral up to ₹3 lakh.