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About Crop Loan

Agriculture is the largest industry in India. It plays a vital role in the economic development of the country. Over 70% of Indian households depend on agriculture for their livelihood. In 2017-18, total food grain production of the country stood at 275 million tonnes.

Farmers are given a lot of offers and benefits to assist them in their endeavour of farming. They need help with irrigation, land loans, modern equipment procuring, livestock purchasing and most importantly crop loans.

Crop loans are a type of short-term advance offered pre-dominantly by primary co-operative societies within the area, to cover the cost of cultivation. It can be used for purchase of quality seeds, fertilizers, manure, etc. This loan can be repaid once the crops have been harvested.

The loan amount is fixed based on the cultivation area and the type of crop being cultivated. The District Technical Committee (DTC) fixes the scale of financing required for each crop in that particular area. The loan amount would be based on that report.

Crop Loan
crop Loans

Features of a Crop Loan

  • Based on the type of crop being cultivated and the area under cultivation
  • High value crops can get higher loan amounts
  • Encourages modernization and adoption of latest technological advancements in agriculture
  • Disbursement is in the form of overdraft facility. Borrowers are given a Kisan Credit Card which can be used for various purposes

Uses of Crop Loans

  • To meet short-term credit requirements of cultivation of crops
  • Post-harvest expenses
  • Produce marketing loan
  • Consumption requirements of farmer household
  • Working capital for maintenance of farm assets and allied activities of agriculture
  • Investment requirement of agriculture and allied activities

Eligibility for Crop Loan

  • Farmers – individually or jointly
  • Tenant farmers, farm land lessee & share croppers
  • Self Help Groups and Joint Liability Groups of farmers
  • Age group – 18-70 years

Interest rates

Agricultural loans and crop loans have a huge backing by the government. NABARD provides refinance to co-operative banks and commercial banks in rural area to offer crop loans to the farmers. For crop loans up to Rs. 3 Lakhs, the interest rate is fixed at 9%. The government further gives an interest subvention of 2%, bringing down the effective interest rate to 7%. Further, for farmers with good credit standing and repaying the loan within one year of loan disbursement date, an interest concession of 3% is given, bringing down the actual interest rate to 4%.

For loans above Rs. 3 lakhs, the interest rates are based on the RBI guidelines and the banks lending rates.

Repayment

The repayment tenure is fixed by the bank based on the anticipated harvest and the marketing period of the crops. It is usually fixed at 1 year for regular crops and at 18 months for crops like sugarcane, banana, pineapple, etc. However, an annual review is conducted, and the credit limit may be upgraded based on the customer requirements.

Security/Collateral

The loans are offered under two conditions – with tie-ups or back-up by Government agencies and non-tie-ups.

For tie-up loans: RBI guidelines allow banks to offer loans of up to Rs. 3 lakhs without any security or collateral but only hypothecation of the crops.

For non-tie-up loans: The banks may require security/collateral for loans above Rs. 1 lakh

Whom should I approach for a crop loan?

Crop loans are classified under agricultural loans. It is offered by most public and private sector banks. However, the major lender of these loans is by rural agricultural co-operative societies, to benefit the millions of farmers in rural India. One can approach their nearest Rural and Agricultural Co-operative Society for a crop loan. Listed below are some of the banks offering crop loans and their salient features are also given

1. State Bank of India :

  • Kisan Credit Card (KCC) as part of their Agricultural loan portfolio.
  • Savings bank interest rates for credit balance in the KCC account
  • Free ATM cum debit card
  • Interest subvention of 2% p.a on loans up to Rs. 3 lacs
  • Additional 3% p.a interest subvention for prompt repayments
  • Certain notified crops/notified areas are covered under crop insurance under KCC loans

2. Union Bank of India :

This crop loan can be availed by all farmers to meet expenses involved in raising a crop including various agricultural practices

  • 35% more loan amount than the scale of finance fixed by the District Technical Committee
  • 100% loan amount on amounts where loan limit is fixed by the DCC, irrespective of the loan amount
  • All eligible crops will be covered under the Pradhan Mantri Fasal Bhima Yojana

3. Vijaya Bank :

Vijaya Kisan Card Scheme

  • Kisan card with a validity of 5 years, subject to annual review, to avoid repetitive documentation every year
  • Allows for crop production, post-harvest expenditure as well as household and farm assets maintenance
  • Usable at ATMs enabled by RuPay and BCA locations

4. IDBI Bank :

Crop loan with Kisan Credit Card

  • Loan offered to farmers and group of farmers towards working capital investments and other agricultural processes
  • Simple and hassle-free documentation process
  • Card validity of 5 years, which needs to be reviewed annually
  • Loan amount based on the scale of cultivation and the nature of crop

5. ICICI Bank :

Rural branches of ICICI Bank offer Kisan Credit Card loans to eligible farmers

  • Loan offered via Kisan Credit card with minimal documentation and competitive interest rates
  • The card can be used at any bank ATM apart from the 1000s of ICICI Bank ATMs spread widely around the country.
  • Card limit and features reviewed annually and upgraded based on customer requirements
  • 24*7 customer support
  • Interest rates starting from 9.50%

6. Kotak Mahindra Bank :

Crop loans can be availed under two schemes I.e. Kisan Credit Card and Agri Term Loans

  • Short term loans that can used for crop cultivation expenses like purchase of high-quality seeds, fertilizers, labour, etc.
  • Loan amount based on the scale of finance of crops grown and the cultivation area
  • Annual review of working capital limit and upgrades based on customer requirements

Conclusion

There are numerous loan products specially devised for the agricultural sector in India. Crop loans are a vital part of agricultural finance system. It facilitates the farmer to continue and take advantage of seasonal elements that are essential in farming. Kisan Credit card allows farmers to use it for their household expenses too which essentially serves as their income while they are waiting for the harvest.

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