A farmer may take out an agricultural loan to finance seasonal agricultural operations or allied industries such as animal farming, pisciculture, or the acquisition of land or agricultural equipment. This form of financing can also be used to purchase inputs like fertilisers, seeds, and pesticides, as well as hire labour to cultivate and harvest the crops.
Agricultural loans also cover the expense of buying land or buying agricultural instruments, storing and transporting produce, and ploughing land for planting, weeding, and transplantation.
Farmers can get an agricultural loan with interest rates as low as 7% per year and processing fees ranging from 0% to 4% of the loan amount.
Eligibility Criteria to Borrow an Agriculture Loan
The requirements for obtaining an agriculture loan vary depending on the sort of loan you choose. However, the following are the typical eligibility criteria:
- Between the ages of 18 and 70, the candidate must be.
- Individuals must own the required assets, which must be hypothecated to the bank after the loan is taken out.
- According to the lender’s terms and conditions, loans can be sought for individually or jointly.
Types of Agricultural Loans
A loan can be obtained for the following agricultural activities:
- Managing daily activities
- Purchasing farm machinery such as tractors, harvesters, and other such items
- Buying land for storage reasons
- Loans for product promotion
Features and Benefits of Agriculture Loans
The key features and benefits of agriculture loans are as follows:
- Simplified Documentation: Applicants will only need to present a few papers when applying for an agriculture loan, such as a valid picture ID, proof of residency, and so on. These papers can be attached to the application form and submitted with it.
- Quick Processing: Lenders will review your application form and any supporting papers you have supplied before approving your loan application. Soon after, the loan amount will be deposited into your account.
- Competitive Interest Rates: Banks and financial organisations that provide farm loans charge competitive interest rates that start as low as 8.80% p.a. borrowing a loan with such a low interest rate will assist you reduce your loan’s overall cost.
- Loan Repayment Tenure Options: Short-term and long-term lending options are available from a variety of farm loan companies. As a result, you may choose a loan package with an appropriate period depending on your financial needs and payback capabilities.
- There are no Hidden Fees: When you take out an agribusiness loan, you may be required to pay additional fees such as a processing fee, pre-payment penalties, and so on. However, before a loan is taken out, lenders will normally advise potential borrowers about the different fees that they may be required to pay.
How to Apply for an Agriculture Loan?
If you are looking to apply for an agriculture loan, it is advisable to research your options online and apply for a loan of your choice by visiting the nearest branch of a lender. When visiting the branch, ensure that you carry the required documentation along with you to quicken the application process.
Certain lenders may also give prospective borrowers the option to apply for an agriculture loan online through their official websites. In this case, you will need to navigate to the respective website, click on ‘Apply Now’, enter the required details in the application form, and upload the necessary documents onto the website.
Regardless of the channel that you choose, the lender will verify your application and approve it. Once your application gets approved, the loan amount will be disbursed into your account.
Why Should You Take an Agriculture Loan?
The various purposes for which you can avail an agriculture loan are as follows:
- Purchase of Farming Machinery And Equipment
- Purchase of Land
- Horticulture Projects
- Purchase of Vehicles
- Establishment of Dairy Units
- Establishment of Small Poultry Units
- For Working Capital Needs
- For Seasonal Requirements
- For Fish Farming
Agricultural loans are accessible in India to anybody involved in agriculture-related industries such as horticulture, aquaculture, animal husbandry, silk farming, apiculture, and floriculture, in addition to farmers cultivating food crops.
National Bank for Agriculture and Rural Development (NABARD)
The National Bank for Agriculture and Rural Development is a financial institution that focuses on agriculture and rural development (NABARD)
Farmers in India receive financial assistance from all major banks and financial institutions at all levels. The National Bank for Agriculture and Rural Development (NABARD), on the other hand, launched this trend of supporting the rural economy and agriculture through financial loans in the early 1980s. All other banks in the country fall under the NABARD’s jurisdiction when it comes to agricultural financing.
Kisan Credit Card Scheme
The Kisan Credit Card was introduced by Indian banks in 1998 to help farmers meet their financial needs. This is accomplished by providing financial assistance to farmers in exchange for a variety of features and perks. The loan amount is determined by a variety of criteria such as cultivation costs, farm maintenance costs, and so on.
This has been especially helpful to farmers who are unfamiliar with banking methods. Furthermore, it is intended to safeguard farmers against ruthless and unofficial creditors who may put them in a precarious financial situation.
How much Agricultural Loan can be availed without any Security?
Banks have lowered security or collateral requirements for agricultural loans to increase institutional borrowing by farmers.
Crop loans up to Rs. 1 lakh do not require collateral, according to RBI guidelines. According to the lending bank’s terms and conditions, loans exceeding Rs. 1 lakh may need security. Similarly, loans for the acquisition of land up to Rs 50,000 demand a 10% margin, while amounts over this require a 10% margin. The land is expected to be mortgaged in the Bank’s favour and serves as collateral.
Leading Banks that offer Agricultural Loans in India
Coming to the public-sector banks in India, there are several leading financial institutions who are known for their exceptional credit services in agriculture-related sectors. Some of these banks are mentioned below.
- State Bank of India Agricultural Loans
State Bank of India is a leader in financing projects in the agriculture sector. They have helped millions of farmer across the country through their 16,000 plus branches. They offer a variety of products like Kisan Credit Card, gold loan for crop production and multi-purpose gold loan for agriculture activities.
SBI also offers agriculture loans for mechanisation of farms. The funds from these loans can be used to purchase combine harvesters, tractors and install drip irrigation. Moreover, loans for activities related to dairy, poultry or fisheries can also be availed. Credit can be taken against warehouse receipts.
- HDFC Bank Agricultural Loans
The HDFC Bank offers a variety of agriculture loans for farmers and agriculturists. The purpose of these loans varies across a broad spectrum, starting from installation of orchards and plantations to promotion of commercial horticulture and production of field crops. Furthermore, the HDFC bank also offers warehouse receipt financing to all farmers and small traders.
- Axis Bank Agricultural Loans
Axis Bank has done well to earn a splendid reputation in the world of agricultural finance. Over the years, they have greatly helped farmers through their diversified financial products such as gold loans, Kisan Credit Card, tractor loans, warehouse receipt financing, loans for developing rural godowns and many more. Axis Bank also offers a product known as Contract Farming, wherein loan agreements are made between farmers and corporates. The amount is provided by the lender instantly for production and supply of the produce, and all of it is governed by the Fair Practices Lending Code.