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Agriculture Loan

Agriculture loan is a credit facility which is used by the farmers to meet the farming, cultivation, irrigation and working capital requirements for agriculture and other agri-associated activities.

In India, all the major banks such as public/ government banks, private banks, co-operative banks and gramin banks offer agricultural loans to farmers at attractive interest rates. Farmers, dairy owners, horticulturists, and any orchard owners are eligible to apply for an Agriculture Loan.

Among them, many banks offer Retail Agri Loan in the form of "Kisan Credit Card" which is a customised credit card designed for farmers to get immediate credit without any hassle to cover up fund requirements of their day-to-day farm related activities.

Banks also extend long-term credit for agriculture & allied activities to cover larger expenditure such as buying agriculture equipment, cattle etc.

Agriculture Loan By Banks

Purpose of Agriculture Loan in India

In India, Agriculture Loan has following purposes:

  1. Purchase of Agricultural Land
  2. Buying farming and irrigation machinery
  3. To cover operating expenses
  4. Horticulture projects
  5. Constructing irrigation channels
  6. Establishment of dairy units
  7. Working capital requirements
  8. Purchasing cattle and livestock
  9. For seasonal needs
  10. For covering storage/ warehouse expenses
  11. Funding for marketing expenses
  12. Establishment of poultry units

Types of Agriculture Loan

  • Land Purchase Loan: This loan facility helps small, marginal and landless farmers or labourers to purchase an agriculture land.
  • Land Development Loan: This loan assists farmers for developing existing land such as land levelling, reclamation of soil, and any other soil conservation measures, etc.
  • Warehousing Loan: It provided by the banks for storage of farm or agriculture commodities for non-perishable commodities.
  • Agriculture Gold Loan Scheme: To quickly meet the agricultural credit needs for both crop production as well as cash credit for allied agricultural activities & investment credit
  • Farm Operating Loans: agriculture loans for day-to-day needs or expansion requirements.
  • Farm Ownership Loans: These include loans for buying agriculture or farming machinery, livestock, tractors etc.
  • Farm Mechanization Scheme: Banks offer such loans for purchasing agriculture equipment, small and large farming machinery, tractors etc. Loan is extended for purchase of new tractors and matching implements/equipment, purchase of new power tillers, purchase of new/used tractors with matching implements, purchase of agricultural machinery, and repairs of tractors.
  • Purchase of draft animals and animal drawn vehicles: Loan is given for purchase of draft animals, animal drawn carts, for transport of agriculture inputs & farm produce and other such purposes.
  • Minor Irrigation Scheme: These loans provided for Purchase of pump sets, digging new wells (open/ bore wells), repairs to wells, deepening existing wells, setting lift irrigation, buying sprinkler sets/ drip irrigation sets/ solar pumps / wind mills,etc.
  • Kisan Credit Card Scheme: KCC is a very popular and demanded scheme for farmers in which they are issued a credit card called "Kisan Credit Card" through which they can draw a cash loan for crop production as well as other such urgent need within the card limit.
  • Crop loans: For raising various crops or development of crops.
  • For Purchase of Vehicles: Purchase of vehicle for using in their farm management activities.
  • Kisan Shakti Yojana: It offers personal loans including repayment of debt to moneylenders.
  • Dairy Plus Scheme: Given for establishment of dairy farm including purchase of milk animals, construction of shed, buying milking machine and other dairy equipment.
  • Broiler Plus Scheme: Given for construction of poultry shed, establishment of broiler poultry farm, feeding room, etc.
  • Financing of Combine Harvesters: Loan is offered for one farmer or group of farmers for buying combine harvesters, heavy harvesting machines.
  • Horticulture Credit: Loans are offered for development of fruit orchard, such as mango, chikoo, grapes, pomegranate, apple, etc. and marketing of such produce, also for green house development and polyhouse.

Eligibility for Agriculture Loan

Following eligibility criterion is required for availing Agricultural Loan from any bank in India:

  • Age of the applicant should be between 18 and 70 years. However, some of them prefer the applicant's age should be atleast 24 years.
  • Applicant should own agricultural land

Documents Required for Agricultural Loan

Following basic documents are required for getting Agricultural Loan in India:

  • Valid Identity Proof (any one): Voter ID Card, Aadhaar Card, Ration Card, PAN Card, Passport, Driving License
  • Valid Address Proof (any one): Lease deed, Rent Agreement, Passport, Driving License, Ration Card, Utility bill (not more than 3 months old), Bank Statement
  • Land ownership/cultivation proof as specified by the lender
  • Any other documents as mandated by the lender

Features and Benefits of Agriculture Loan

Various Types of Agriculture Loan

There are variety of agriculture loans available which cover almost all the funds requirements related to different agricultural activities. You can choose any type of agriculture loan according to your needs.

Flexible Loan Repayment Term

Agriculture loan is available for short term as well as for long term. Short term loans are referred to as "Cash Credit" and long term loans are called "Term Loans". Short term loans are availed for less than 1 year while long term loan ranges for a period from 5 to 15 years which are offered by the banks on the basis of your earnings and repayment capacity.

No Hidden Charges

You will get the information about all the charges involved in agriculture loan before-hand by the lending bank. These charges are other than the loan interest rate. These charges include the processing fee, foreclosure charges, etc. Therefore, there are no hidden charges involved in case of agriculture loans.

Quick Processing

After you submit the loan application along with required documents, lending bank will verify your application. If all the things are found correct, your loan application will be approved by the bank and you will be informed about the same. The loan amount will be released soon after the approval.

Interest Rate of Agriculture Loan

The interest rate on agriculture loan ranges from 8.80% to 12.50%. These rates also differ from lender to lender. Some of other significant factors in determination of interest rate are income of applicant, repayment capacity, type of loan applied for and past credit history of the applicant.

Repayment Tenure of Agriculture Loan

The repayment tenure differs from lender to lender. In case of cash credit, it is usually less than 1 year and for long term loans, it varies from 3 to 9 years. There are various flexible loan repayment options available to repay the loan such as monthly, half yearly and yearly instalments, you can select any of them based on your income and repayment capacity.