Overview

India is primarily an agricultural economy and the nation thrives on this business. Farming is a series of several activities involving the transformation of a seed into an end product. There's a lot of specialized farming methods, processes, and machinery involved. Most farmers in India have limited resources and need to opt for loans to meet their needs.

Agricultural loans in India include not only farming activities for plant cultivation, but also other types of farming such as animal farming, horticulture, floriculture, silk farming, aquaculture, fish farming and apiculture.

Some of the principal areas covered by a farm loan are

• 1. Purchase of tractors, harvesters and other farming machinery
• 2. Purchase of farming lands
• 3. Organising storage facilities
• 4. Marketing of the products
• 5. Transportation cost from farms to markets
• 6. Expansion of agricultural activities

Besides these, there are also financial supports, such as grants and subsidies, which provide farmers with insurance in the event of crop loss due to weather conditions or other factors.

Agricultural Loans primary aim is to provide credit flow for the smooth functioning of the country's agriculture sector. That includes output quantity and productivity.

What are the eligibility criteria for Agriculture Loans in India?

All kinds of farmers such as small and marginal farmers, sharecroppers, oral lessees and tenant farmers are liable for the Agricultural Loans application.

What are the Documents required for the Agriculture Loans?

The set of documents needed to get agricultural loans available are very simple. These includes:

• 1. Valid Photo identity proof
• 2. Valid address proof
• 3. Proof of land-ownership, revenue receipts, a record of rights etc.
• 4. Kisan Credit card: This is a card issued to all the farmers

Specifications of interest rate for the Agricultural Loan

Crop Loans :

As per India's government guidelines, the interest rate for crop loans greater than Rs 3 lakhs is 7 % p.a. If the farmers can repay the loan in a timely manner, they are given a 3 % interest subsidy, resulting in a 4 % interest rate p.a.

For loans above Rs 3 lakhs the interest will be paid in compliance with RBI directives. According to the RBI guidelines there is no protection provision for loans up to Rs 1 lakhs. For loans above the Rs 1 lakhs, collaterals are needed.

Post-harvest :

Post-harvest loan interest rate is 7 % with interest rate subvention. If the farmers make use of post-harvest loan against receipt of negotiable warehouse, the banks would charge commercial interest rates.

Land-purchase :

The interest rate for land purchases within 5 km of residence of the farmer varies from time to time. There is no margin needed for loans up to 50, 000 Rs. However, the margin threshold for loans above Rs 50000 is 10 %.

Types of Agricultural Loans

There are different choices in India when it comes to agricultural loans. There are nationalized and private banks that have different requirements for the loans. Banks recognized by the government ensure complete transparency in the processing, disbursement and repayment of loans. It means poor farmers don't get robbed, and they don't end up paying anything extra for the loan.

National Bank for Agriculture and Rural Development (NABARD)

NABARD is the premier bank to provide farmers with financial assistance. Back in the 1980s, this financial institution was the one that conceptualized the provision of financial assistance to farmers. For agricultural lending, all Indian banks come under NABARD's jurisdiction. NABARD's financial assistance to farmers is one of the Government of India's flagship programmes. One of NABARD's most important contributions is its Kisan Credit Card (KCC).

Kisan Credit Card Scheme

The Kisan Credit Card is a unique product primarily designed to support poor and illiterate farmers who are not well aware of the banking operation. The aim of this card is to protect the farmers ' interests from the hands of unscrupulous moneylenders who can charge exorbitant interest on them. This credit card is connected to the savings account of the farmer and can be used to make easy use of finance for various agricultural activities such as planting, farm maintenance, tractor purchase, and much more.

Loans by Nationalised Banks

Agricultural loans are issued by leading nationalized banks such as Punjab National Bank, Union Bank of India, United Bank, Oriental Bank of Commerce, Dena Bank, etc.. Many of these banks give the farmers a plethora of facilities and low interest rates. The services that these banks provide are rural godown building, debt swapping, warehouse receipt financing etc.

Loans by State Bank of India

State Bank of India has helped a large number of farmers to smoothly conduct their agricultural activities. State Bank of India offers products like Kisan Credit Card, multi-purpose gold loan, crop development of gold loans. There are also loans relating to poultry, dairy, or fish farming operations.

Private Sector Bank Agricultural Loans

Several leading private sector banks like ICICI, Axis, HDFC, etc. also offer farmers end-to-end farm financing. Many of those banks offer both short-term and long-term loans.

Frequently Asked Questions: Agriculture Loans

Can Agriculture Loan be used to purchase land?

Yes, it can be used to fund the buying of land but only within the 3-5 km radius of the farmer's house or within the village boundaries.

What are the other associated activities for which Agriculture loan can be availed?

Purchasing property, purchasing equipment, manufacturing and transporting warehouse help are associated tasks for which agricultural loans can be made available.

What is the amount of security required for availing agricultural loans?

Banks also relaxed the safety and collateral requirements to give a boost to agricultural loans. According to the Government of India there is no need for protection for loans up to Rs 1 lakhs. The security guidelines are set by the individual banks for loans exceeding Rs 1 lakhs.

Can women avail agriculture loans?

Yes, government of india is encouraging women to take advantage of credit for agricultural needs. Some banks also provide the women borrowers with special facilities.

Can every farmer apply for farm purchase loan?

Marginal or small farmers may take advantage of those loans. This applies to farmers owning 2,5 acres of harvested land or 5 acres of non-irrigated land. The land purchase loan may also be used by tenant farmers or farmers working on a joint basis.