Agriculture Loan FAQ, FAQ of Agriculture Loan

What is Agriculture Loan?

Agricultural loan is a credit which is availed by a farmer to get the fund for seasonal agricultural activities or allied activities like animal farming, pisci-culture or purchase of land or agricultural tools.

Can I get an agriculture loan?

If you are a farmer, owning an agricultural land and aged between 21 and 60 years, then you can apply for agriculture loan. However, different lenders may have different eligibility criteria to approve the loan.

What are the minimum & maximum agriculture loan amounts?

The agriculture loan amounts is assessed and customised by the lender to suit your individual needs. It also depends upon the cultivation land that you own.

What is EMI?

EMI stands for equated monthly installment which is a fixed amount repayble by the borrower to the lender at a specified date each month. EMI includes interest payment as well as principal repayment.

Can I repay my agriculture loan before the completion of my loan tenure?

Yes, foreclosure is allowed with or without some penalty as per specific bank's rules and guidelines.

Can I pre-pay the entire loan amount?

Yes, you can prepay the entire loan amount but you will have to pay a pre-payment fee on outstanding loan amount.

Which type of security is required for availing Agriculture Loan?

The demand of security for agriculture loan solely depends upon the policies of the lending bank. It differs from bank to bank. It is usually seen that for a small amount of loan, banks do not require any security while for larger amounts, they may require hypothecation/ pledge of asset bought out of the loan amount and in some specific cases, mortgage of land and third party guarantee is also stipulated by the banks.

Can I avail Agriculture Loan to purchase a land?

Yes. You can avail agriculture loan to purchase a land but with some conditions such as the land purchased out of borrowed money should be within the boundaries of your village, etc.

What is Kisan Credit Card (KCC)?

A Kisan Credit Card (KCC) is a special type of credit card through which a farmer can access low-interest funding from a bank. Such cards are provided by commercial banks, co-operative banks and regional rural banks. It offers flexibility in loan repayment as farmers can pay post the harvest season and has an expandable credit limit based on the income of the card holder.

What is margin?

The margin is the amount which the borrower needs to pay out of his pocket. It is usually asked by the lender in order to approve your loan.

What is the process of availing the agriculture Loan?

You need to follow below mentioned process in order to avail a agriculture loan:

  1. Visit to your bank/ lending institute
  2. Obtain and fill up Agriculture Loan Application Form
  3. Submit the form along with required documents
  4. The lender will check your application and process your loan application
  5. Sanction of agriculture loan
  6. Disbursal of agriculture loan
How much time is required for sanctioning of agriculture loan?

If you have filled up your application form in all respect completely and submitted all the documents required by the bank/ lender, then it usually takes 4 to 10 working days to get a sanction of agriculture loan.

What will be the frequency of repayments?

The frequency of repayment can be Monthly, Quarterly, Half-Yearly or Annually. In particular cases, it will vary according to the type of agriculture loan availed by you.

What factors should I consider in the lender for applying for agriculture loan?

The most important factor is interest rate charged on loan. Secondly, the loan tenure and loan processing time. Finally, whether the lender is ready to provide full loan amount required by you.

What are the documents to be submitted for getting agriculture loan?

You will be required to submit following documents for getting agriculture 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
What are the other allied activities eligible for agricultural loan?

Apart from purchasing of land, or purchasing of agricultural tools, there are other allied activites also for which you can avail the loan. These activities are called "Allied Agriculture Activities" which are mainly livestock rearing, like Dairy, Poultry, Goatery, Piggery, sheep rearing, etc.

What is the rate of interest on my agriculture loan?

The rate of interest charged on agriculture loan depends upon bank/ lending institutions. The rate of interest usually ranges from 8.50% to 15%. It also depends upon the loan tenure too.

How should I choose the lending bank for my agriculture loan?

For choosing the lender, it is very important and beneficial for you to firt compare the interests charged by different lenders on agriculture loan and decide the lender who is offering you a loan with a competitive rate of interest and repayment terms. If you have already taken any loan from any lender and making timely repayments of your existing loan, then you can negotiate for a lower rate of interest on agri loan with the same lender.

What is Crop Insurance?

Crop insurance is an insurance arrangement aiming at mitigating the financial losses suffered by the farmers due to damage and destruction of their crops due to various production risks.