RBI asks banks to waive collateral requirements for agricultural loans up to ₹2 lakh per borrower

The Reserve Bank of India has instructed banks to waive collateral and margin requirements for farm loans, covering allied‑activity loans up to ₹2 lakh per borrower, and to continuously monitor the end‑use of all agricultural advances, in line with its recent Kisan Credit Card (KCC) guidelines.

The RBI noted that a voluntary pledge of gold or silver as security for farm loans within the collateral‑free ceiling does not breach its collateral‑free lending rules for the agriculture sector. In such instances, banks must secure and keep a clear declaration from the borrower.

The RBI clarified that its collateral‑free limit applies solely to secondary collateral, not to primary security or the assets financed by the loan. For loans exceeding ₹2 lakh, banks may set their own collateral and margin rules according to their credit policies.

For KCC loans secured by hypothecation of crops or stocks and backed by recovery tie‑up arrangements, banks may waive collateral requirements up to ₹3 lakh.

Given the varying interest rates and repayment terms for different KCC credit products, the facility can be split into sub‑limits: a short‑term cash‑credit limit combined with a savings account for crop cultivation and allied activities, and a separate long‑term loan for agriculture and allied activities.

When sanctioning, the maximum permissible limit (MPL) for short‑term crop loans is calculated notionaly by adding 10 % to the previous crop season’s limit, starting from the second season onward. If the drawn amount exceeds the MPL in any season or year, the MPL will be re‑evaluated during the next review.

Marginal farmers can also avail a flexible credit limit ranging from ₹10,000 to ₹50,000 (Flexi KCC), determined by the bank’s assessment and not linked to land value. This limit should be based on the crops cultivated, post‑harvest warehousing storage credit needs, other farm expenditures, consumption requirements, and investment needs for agriculture and allied activities.

Published on June 19, 2026