About 58% of India’s population is supported by agriculture which contributes nearly 14% to India’s GDP. Nonetheless, most farmers require financial assistance to produce quality crops yearly. The Government and many other financial organisations offer agriculture loans to help them get through tough times and manage their finances.
It is important to have an effective and efficient rural credit delivery system to ensure timely, appropriate, and equal access to loans for increased agricultural profits and productivity.
Agriculture loans are loans that farmers use for various needs, including acquiring farming and irrigation equipment, growing crops, and financing other agriculture-related activities. Also known as crop loans, they can also be used to purchase materials like fertilisers, seeds and insecticides, and hire labour to cultivate and harvest the crops.
Banks, Government agencies, and microfinance firms provide agricultural loans to assist in developing India’s agricultural sector. Compared to other types of loans available to individuals, agriculture loans have lower interest rates.
Farmers may require agriculture loans for the following reasons:
It can also be used as tractor loans or for buying land, constructing farmhouses and other buildings on the land, buying farm machines and harvesters, buying seeds, fertilisers and pesticides and other inputs required for farming operations.
|Lender’s Name||Interest Rates||Processing Fees|
|IndusInd Bank||Starting from 7% p.a.||1.25% of the loan amount + GST|
|State Bank of India||Starting from 7.25% p.a.||0% p.a. to 1.25% p.a.|
|IDBI Bank||Starting from 7% p.a.||At the discretion of the bank|
|Karur Vysya Bank||Starting from 8% p.a.||At the discretion of the Bank|
|Central Bank of India||Starting from 7% p.a.||At the discretion of the Bank|
|ICICI Bank||Starting from 7.25% p.a.||Up to 2% (plus applicable taxes) of the facility amount|
|HDFC Bank||Starting from 7.2% p.a.||Up to 2% + GST|
There are numerous types of agriculture loans in India available for farmers. They can be categorised based on tenure, end-use, and other categories of loans as mentioned below:
Based on tenure, there are two types of agricultural loans:
Based on the end-use, there are three types of agricultural loans:
Other types of agriculture loans include:
This loan can be obtained by using gold as collateral. It covers various farming expenses, such as purchasing machinery or crop production costs. These loans usually have a low-interest rate and allow farmers to employ gold that would otherwise be sitting idle in a locker.
Farmers establishing vegetable farms can seek a horticulture loan, which covers the costs of running such farms and other horticulture activities like cutting wild trees, erecting fences, etc.
A forestry loan can be applied for farmers who grow crops on trees. The loan can cover the costs of activities such as turning barren land into farmed land, installing irrigation channels, eradicating wild forests, etc.
|Bank||Some Types of Agriculture Loans|
|State Bank of India (SBI)||Kisan Credit CardTractor LoanCombine Harvester LoanMultipurpose Gold LoanKCC for Allied ActivitiesIrrigation Loan Pradhan Mantri Mudra Yojana (PMMY) – Allied Agri Scheme for Debt Swapping of Borrowers|
|Karur Vysya Bank||Green Card / Green Card Plus (Kisan Card)Warehouse Receipt LoanKisan TatkalJewel LoanGreen HarvesterLoans for Horticulture ProjectsPoultry LoanDairy LoanKVB Agriculture Infrastructure Fund|
|National Bank for Agriculture and Rural Development (NABARD)||Agriclinic and Agribusiness Centres SchemeNew Agricultural Marketing InfrastructureNational Livestock Mission|
|Induslnd Bank||Production Loan (CC)Investment Loan (TL)Hi-Tech Agriculture (OD)Hi-Tech Agriculture (TL)|
A few features and benefits of agriculture loans include:
For an agricultural loan, most lenders require the following documents:
There are different types of loans available, offered by various Government, commercial, agriculture banks and corporate banks. A borrower may study the many possibilities available to them based on the loan’s purpose.
Applicants can apply for the loan in two ways:
There will be a verification process regardless of whether one applies online or offline, and the loan will only be disbursed once the application has been authorised.
A few things to remember when applying for an agriculture loan are:
If you are interested in securing an agriculture loan specifically for farming or agricultural means, make sure that you know all the rules and regulations. Some lenders may offer generous terms, others less so – knowing whether these terms suit your needs is vital before applying for the loan.
Ans: Each lender has different eligibility criteria when offering crop loans. Some common criteria mandate that the applicant must be between 18 – 65 years of age, they should be Indian citizens with no criminal record, and should not have defaulted on any loan.
Ans: Yes, banks do lend money to farmers who want to buy land. However, different lenders will have different criteria, and the loan amount will also vary from lender to lender.
Ans: Yes, a guarantor is required by most lenders. However, you can visit the lender or their website to ensure that, as different lenders will have different requirements related to the guarantor.
Ans: Banks provide farmers with a nominal interest rate in exchange for special concessions, incentives and flexible repayment alternatives, and the interest rate offered will differ from lender to lender.
Ans: Banks, government agencies, and microfinance firms provide agricultural loans to assist in developing India’s agricultural sector.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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