Agriculture is one of the main occupations in India with as much as 65% of the families deriving income from it and accounting for 40% of the national income. It is no wonder that it is the backbone of India’s economy. As most of the farmers are at the mercy of the weather Gods and also due to their financial conditions they need monetary aid so that they can have good produce year after year. To help overcome this financial crunch, government and many other financial institutions are providing loans. These loans are called Agriculture loans, there are many types of loans and is based on farming activities.
What farming activities are eligible for agriculture loans in India?
You can avail of an agriculture loan for a number of purposes and there are many lenders from whom you can get them. Most farmers avail these loans for
Purchase of land
Buying farm equipment
Establishing dairy or small poultry units
Fulfil seasonal farming requirements
Running daily operations
Working Capital needs
Types of Agriculture Loans in India
Based on the purpose of farming activity the financial institutions have divided them into different types of loans
Crop loan and Kisan Credit Card: This is a short term loan and is provided to fulfil the seasonal financial requirements of a farmer. It can be used for purchasing seeds, sowing, growing crops, etc. These loans will usually be a small amount and are provided so that they have some money to meet the needs of seasonal farming.
As these are recurring needs for a farmer, the government has introduced the Kisan Credit Card scheme so that they can easily and quickly get loans at low-interest rates with easy repayments. It is a smart-card cum debit-card that can be used for many purposes.
Agricultural term loan: This loan is provided for a longer period of time than a crop loan and is applied for bigger farming expenditures like buying machines, building irrigation facilities, etc. The loan amount can range from a few thousand to 20 to 30 lakhs and the term is from 3 to 15 years and is provided depending on the repayment capacity of the farmer.
Working capital loan: It is aimed at helping with meeting the needs of working capital for agriculture or its allied activities. These are useful to cover the expenses that are not covered under crop loans or KCC. Apart from farmers, this loan can also be availed by sellers of seeds, fertilizers, tractors, etc.
Farm mechanization loan: It can be used to buy new machines like tractors or repair the old ones. Many banks have categorized it based on end-purpose while there are others who provide a general-purpose one.
Horticulture loans: These are loans that are provided for setting up of horticulture lands like developing orchards, farms, etc. It can also be used for other horticulture reasons like fencing, clearing undergrowth and other such activities.
Agriculture gold loan: A loan is provided for the pledging of gold jewellery and is provided for crop cultivation or other farming purposes. It helps the farmers utilize the value of gold to avail loans.
Forestry loan: This loan can be used to convert a wasteland into a farmable one or for other purposes like clearing the undergrowth or for building irrigation channels, etc.
Loan against warehouse receipts: These loans are useful as they need not sell goods at low prices which are called a distress sale. After harvesting a farmer can store the goods in an accredited warehouse which provides a receipt. This receipt can be used to get loans from banks.
Agriculture loans interest rates: The interest rate for these loans can vary depending on the type of loan availed, the lender and the end-purpose. But in general, the interest rates for these loans are about 8% or more. Apart from that, the borrower has to pay a one-time processing fee which is in the range of 0 to 2% or more of the loan amount required. The repayment option is also flexible and they have the option to get the longest tenure possible based on the loan type.
Eligibility Criteria For Agriculture Loans in India
The eligibility varies based on the type of loan that you take. In general, the criteria is as follows
The borrower should be over the age of 18 and less than 70 years
The borrower should have necessary assets like a cultivable land which will be hypothecated to the bank once the loan is taken
It is also given to tenant farmers, marginal farmers, oral lessees and sharecroppers
It can be applied on a joint or individual basis depending on the terms and conditions of the lender.
Documents Needed to Apply for Agriculture Loans in India
The following documents are a must for any type of loan that you avail of. The lender may ask for more documents over and above this too depending on their rules and regulations.
Filled application form
Land or asset documents
Pan Card, Voter Id, Aadhar Card or any other authorized id for identity proof
For Address proof any of the following: Bank statement, Ration card, Driving license can be provided.
How to apply for an agriculture loan in India?
There are many types of loans and various government, private and corporate banks that offer these loans. Hence it is necessary to do thorough research on the options available for you based on the purpose of the loan. Applying for a loan can be done online if you are choosing the institutions that have an online facility or you can visit the nearest branch of the lender of your choice.
If you choose an online lender then you can apply for a loan using the official website by filling out the application form and uploading all the required documents and clicking on ‘Apply Now’.
If you prefer the traditional option, carry all the necessary documents so that the processing can take place quickly.
Irrespective of whether you apply online or offline there will be a verification process and loan will be disbursed only when the application gets approved.
Agriculture loans are available for various purposes and are provided by various lenders. The borrower has to conduct proper research to get the best deal possible.