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India is predominantly an agricultural economy and the nation thrives on the basis of this sector. Farming is a set of many activities that are involved in transforming a seed to an end product. There are a lot of techniques, procedures and equipment involved in advanced farming. Most of India’s farmers have limited resources and need to opt for loans to fulfil their requirement.
Agricultural loans in India just doesn’t just involve the farming activities for the cultivation of crops but also any other forms of agriculture such as animal husbandry, horticulture, floriculture, silk farming, aquaculture, pisciculture, and apiculture.
Some of the main areas covered under a farming loan are:
Apart from these, there are also financial aids such as grant and subsidies that provide protection to the farmer in the event of damage to crops due to weather conditions or other factors.
The main purpose of Agricultural Loans is to provide credit flow for the smooth functioning of the farming sector in the country. This involves the quantum of production and productivity.
About Loan for Agriculture
All kinds of farmers such as small and marginal farmers, sharecroppers, oral lessees and tenant farmers are eligible to apply for the Agricultural Loans.
The set of documents required for availing agricultural loans are very basic. These include:
Crop Loans :
As per guidelines by the government of India, for crop loans more than Rs 3 lakhs the interest rate is 7% p.a. If the farmers are able to repay the loan timely, they are offered an interest subvention of 3%, resulting in the interest rate being 4% p.a.
For loans beyond Rs 3 lakhs, the interest is charged as per RBI directives. According to the RBI guidelines, for loans up to Rs 1 lakhs, there is no requirement of security. For loans above Rs 1 lakhs, there is a requirement for collaterals.
The interest rate for the post-harvest loan is 7% with interest rate subvention. If the farmers avail post-harvest loan against negotiable warehouse receipt, the banks will charge commercial interest rates.
The interest rate for land purchase within 5 km of the farmer’s residence varies from time to time. For loans up to Rs 50, 000, there is no margin required. However, for loans above Rs 50000, the margin requirement is 10%.
When it comes to agricultural loans, there are various options in India. There are nationalized and private banks which provide the loans with various specifications. The government-recognized banks ensure complete transparency in Loan processing, disbursal, and repayment. This ensures that the poor farmers are not cheated, and they do not end up paying anything extra towards the loan.
National Bank for Agriculture and Rural Development (NABARD)
NABARD is the premier bank for providing financial aid to the farmers. This financial institution is the one which has conceptualized the provision of financial aid to the farmers back in the 1980s. For credit in the field of agriculture, all the Indian banks fall under the authority of NABARD. The financial aid to the farmers provided by NABARD is one of the flagship programmes of the Government of India. One of the most notable contributions of NABARD is the Kisan Credit Card (KCC).
Kisan Credit Card Scheme
The Kisan Credit card is a unique product designed specially to help the poor and illiterate farmers who aren’t much aware of the banking activities. The aim of this card is to protect the interest of the farmers from the hands of unscrupulous moneylenders who might charge exorbitant interest from them. This credit card is linked to the farmer’s savings account and can be used to easily avail finance for various agricultural activities such as cultivation, farm maintenance, purchase of tractors, and many more activities.
Loans by Nationalised Banks
Leading nationalized banks such as Punjab National Bank, Union Bank of India, United Bank, Oriental Bank of Commerce, Dena bank etc. provide agricultural loans. Most of these banks offer low interest rates and a plethora of facilities to the farmers. The services offered by these banks are the construction of rural godown, debt swapping, warehouse receipt financing etc.
Loans by State Bank of India
State Bank of India has helped a huge number of farmers to perform their agricultural activities smoothly. State Bank of India offers products such as Kisan Credit card, multi-purpose gold loan, gold loan crop production. There are also loans for farming activities related to poultry, dairy or fish farming.
Private Sector Bank Agricultural Loans
Many leading private sector banks such as ICICI, Axis, HDFC, etc. also offer end-to-end agriculture finance to farmers. All these banks offer short-term as well as long term loans.
1. Can Agriculture Loan be used to purchase land?
Yes, it can be used to finance land purchase but only within the radius of 3-5 km of the farmer’s house or within the boundaries of the village.
2. What are the other associated activities for which Agriculture loan can be availed?
Purchase of land, purchase of tools, warehouse support for the produce and transportation are the allied activities for which agriculture loans can be availed.
3. What is the amount of security required for availing agricultural loans?
To give a boost to agricultural loans, banks have relaxed the norms for security and collaterals. As per the Government of India, for loans up to Rs 1 lakhs, there is no need for security. For loans exceeding Rs 1 lakhs, the security norms are set by the individual banks.
4. Can women avail agriculture loans?
Yes, the Government of India encourages women to avail credit for agricultural needs. Some banks even provide special facilities for women borrowers.
5. Can every farmer apply for farm purchase loan?
These loans can be availed by marginal or small farmers. This refers to farmers who own 2.5 acres of irrigated land or 5 acres of non-irrigated land. Tenant farmers or farmers operating on a sharing basis can also avail loan for the land purchase.
Uddhav Thackeray vows complete farm loan waiver27 Dec 2019
Maharashtra Chief Minister Uddhav Thackeray assures a complete farm loan waiver in the state. He also announced the formation of an experts’ committee on the sugar industry. The Shiv Sena-led government had announced a farm loan waiver upto Rs. 2 lak...
Maharashtra Chief Minister Uddhav Thackeray assures a complete farm loan waiver in the state. He also announced the formation of an experts’ committee on the sugar industry. The Shiv Sena-led government had announced a farm loan waiver upto Rs. 2 lakhs just one day before the CM had announced the full loan waiver. The state cabinet approved a loan waiver scheme under which short term loans up to Rs. 2 lakhs which were taken between April 1, 2015 to March 31, 2019 will be written off. Thackeray said, “We have waived loans upto Rs. 2 lakh as immediate relief to cultivators. But we will also make sure that their entire loan is waived”.
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