How to Avail Agricultural Loans in India
How to Avail Agricultural Loans in India
Introduction;
It is a credit facility provided by the different banks to the farmers for their agricultural or allied operational needs like; expenses related to crop production, post-harvest activities, contingencies, animal husbandry, purchase of agricultural land or agricultural tools, etc.
Types of agricultural loans;
On the basis of available options, the aricultural loan can be broadly categorized into 2 parts;
(a) Agricultural short Term loan; It is based upon the provided tenure period from the bank. example; crop loan and agriculture term loan
(b) Agricultural Long Term Loans; In this kind of loan facility tenure of the credit facility or loan repayment is not fix It is basically depends upon the end use of the credit facility; Like Tractor Loan, Loan for crop Harvester, loan for Poultry farm, Loan for pisciculture/fisheries/ farm infra development, etc.
(A) Agricultural Short Term loan;
Crop Loans; Crop loans are the ‘short-term loans ‘also known as Retail agriculture Loan or Kissan Credit Cards (KCC) provided to the farmers, agriculturists, and Cooperative societies for the purchase of agricultural inputs like; HYV Seed, Fertilizers, Agrochemicals, maintenance farm machinery, Pre and post farm activities, etc. we may conclude crop loan as a credit facility by the banks to the farmers for their day to day farm operational needs. The purpose of this kind of loan is to save farmers from the unorganized local money lenders trap. Under this scheme, farmers can avail of credit facilities from the bank on a very low interest that is as low as 2% per annum. The repayment of this loan is based on the harvesting and Marketing period of the crop.
Agricultural Term Loan; It is a loan/ Credit facility offered by various banks for up to a period of 48 months to meet farm expenses that are not seasonal in nature; purchase of the farm equipment, installation of Solar Pump, Installation of Drip irrigation system, up-gradation of existing farm equipment, etc. This loan is mostly provided for the 3 to 4 years by almost all the banks in our country. The repayment of this loan broadly depends upon the convenience of the borrower and It can be repaid in the form of monthly, half-yearly, or annual installments.
(B) Agricultural Long Term loans;
Agriculture long-term loans are the credit facility provided by different banks for the farm’s income generation asset creation or for the support of Agricultural allied services This loan promotes technical up degradation for improving the farm productivity that results in an incremental increase in farmers and entrepreneurs’ income. These loans are mostly provided up to a maximum period of 15 years. The agricultural long-term loans can be divided into two groups based on their purpose —-
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Farm Sector Loan |
Non-Farm Sector Loan |
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· Land development · Minor & micro-irrigation, drip irrigation · Water-saving and water-conservation devices · Dairy · Poultry · Beekeeping · Sericulture · Fisheries · Animal husbandry · . Loans to Self Help Groups / Joint Liability, Groups · Dryland farming · Contract farming · . Plantation & horticulture · Agro-forestry · Seed production · Tissue culture plant production · Loans to corporate farming, farmers’ producer organizations (FPOs)/individual farmer organizations, Agriculture partnership firms, and agriculture co-operatives of farmers & Agriculture Allied Activities, up to an aggregate limit of ₹ 2 crore per borrower · Agriculture implements · Hi-tech Production of high-value crops/ exotic vegetables, cut flowers under specific controlled conditions i.e. poly house/greenhouse, · For the establishment of hi-tech export-oriented production like mushroom units, modern tissue culture labs, precision farming |
· MSMEs that are involved in manufacturing & service, & create employment opportunities in rural areas · Agri-clinics and Agri-business centers · Rural housing · Agro-processing · Soil conservation and watershed development. · Agri-marketing support infrastructure like; cold storage, warehouse, godowns, market yards, silos etc. · Non-conventional energy sources, · Financing in areas of watershed & tribal development programs · Establishment of Plant tissue culture and agri-biotechnology facilities, seed production, Establishment of bio-pesticides, bio-fertilizer, and vermicomposting units. · Bank credit facility to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) , and Large-sized Adivasi Multipurpose Societies (LAMPS) for on-lending to agriculture. · Loans are also sanctioned by banks to MFIs for on-lending to the agriculture sector · . KVI (Khadi Village Industries) · Loans for rural schools, health care facilities, drinking water facilities, sanitation facilities, and other Social infrastructure in Rural areas · Renewable energy like solar-based power generators, biomass-based power generators, windmills, micro-hydel plants, and for non-conventional energy-based public utilities viz. street lighting systems, and remote village electrification · Krishak Sathi Yojana · . Area development schemes
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Important Criteria for Availing the agriculture Bank Loans ;
On the basis of the following criteria, anyone can avail of the credit facility/loans provided by the different banks;
a) Eligibility Age; The eligibility age for the different agriculture loans is 18 to 70 years for an individual applicant In the case of the Agriculture business group/agriculture Societies etc. the age of applicants should be 21 years at the time of application and 65 years at the time of maturity.
b) Residential Status; All the credit/loan facilities are available for the Indian Residents only
c) Land Ownership Criteria; The applicant must have their own piece of land or may have had access to the specified land to perform agriculture or agricultural allied services.
d) Eligibility Criteria of an Applicant; He/she may be an individual farmer or a tenant farmer or a Share Cropper or oral lessees ( Pattedar in common language) or Self-help groups(SHGs) or Joint Farmers Liability Groups(JLFGs ) including the tenant farmers also
List of Documents Required for Applying for an Agricultural Bank Loans ;
The Common document requirement to avail of an agricultural Loan under the different schemes are as follows;
1) Application form; It should be properly filled as per the lender’s requirements, avoid overwriting and cuttings, don’t use abbreviations while you filling the application form, and Tag all the documents in a representable manner.
2) Identity proof; One valid identity proof is required you may provide any one of the following proof
3) Proof of residence; One valid residence proof is required you may provide any one of the following proof
5) No due certificate; from Co-operative Credit Society (If required)
6) Land Agreements Record; Copy of the land sale agreement/lease agreement
7) Bank Statement; Last six months bank statement (If required)
8) Passport size photograph; Number of photographs required of an individual or co-applicant may vary 2-to 4 as per different bank requirements but it must be very latest and clearly identifiable.
Agriculture Loans Interest Rates;
As we know agriculture is a prime sector of the country, hence all the commercial banks, public and private sector banks, and cooperative societies banks offer agriculture loans at very nominal interest rates.
Here is a list of the interest rates of agriculture loans from some of the top banks in India
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Name of the Bank |
Interest Rate |
Processing Fee |
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State Bank of India |
7.25% p.a. onwards |
0% p.a. to 1.25% p.a. of the loan amount |
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UCO Bank (UCO Kisan Bhoomi Vriddhi) |
3.10% – 3.50% |
Nil for loans up to Rs. Three lakhs |
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Union Bank of India (Long-term agriculture loans) |
8.10% upwards |
Nil for loans up to Rs. 25,000 |
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Central Bank of India |
Up to 13.25% p.a. |
At the discretion of the bank |
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HDFC Bank (Retail Agri Loans) |
9.10% – 20.00% |
2% to 4% (up to a maximum of Rs. 2,500) |
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ICICI Bank (Agri Term Loan) |
10.00% – 15.33% |
0.5% p.a. to 4% p.a. of the loan amount |
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IndusInd Bank (Crop Loan) |
10.15% – 14.75% |
Up to 1% of the sanctioned amount plus service tax |
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Karur Vysya Bank (Green Harvester) |
10.30% onwards |
At the discretion of the bank |
Please note; The interest rate on agricultural loans is very fluctuating It may vary it depends upon the Scheme and type of loan you have opted
The Benefits of agriculture loans ;
1) Lower Interest rates; The interest rates offered by different banks are very competitive and low it just gets start from 8.8% per annum
2) Easy and Quick Processing; Banks processed agricultural loans applications within a few working on the basis of the nature of the priority in regard to agriculture loans. Once the loan gets approval it will be directly credited to the borrower’s accounts within a few working days.
3) Zero Hidden Charges; Agricultural loans are very transparent in nature and all the fees/Charges are clearly defined before the approval of loans and it is the responsibility of the lander to do so as per government guidelines.
4) Easy Flexible Repayments; Repayments of agricultural loans are very easy and flexible as compared to normal ones. The repayments of agricultural loans totally depend upon the convenience of the burrowers (Farmers) in most of the short-term or long-term credit facilities to the farmers.
5) Easy Documentation; Documentation for agricultural loans is very simple and easy. The burrowers require very few documents in most cases like as; Photo Identity proof, Residential proof, and land records/land deed records.
FAQs
Q Can women get the agriculture Loan?
Yes, Every woman is equally eligible as a men farmers to avail the agriculture loans. some of the banks also offer discounts on interest for women borrowers
Q Can a bank provide a loan for the purchase of land?
yes, Banks provides loans for the purchase of agricultural loans land but the land should be within a periphery of 5 km from the purchaser village or residence
Q For availing of the bank loan is any guarantee is required?
If the loan amount is up to one lacs rupees there is no requirement of the guarantor In case of higher amounts bank requires a guarantee.
Q How much time do banks take in processing the loan application?
Most of the bank takes 7 working days in processing after the submission of the loan application form.
Q What are the eligibility criteria for availing the loan for Land purchase?
Small and Marginal farmers who have less than 2.5 acres of irrigated land or less than 5 acres of unirrigated land are eligible for a land purchase loan. Tenant farmers or Sharecropper farmers are also eligible for land purchase loans.
Q Can I disclose my agriculture loan earlier?
yes, you may disclose your agriculture earlier but you need to pay some penalties as per the bank’s terms and conditions.
