The agriculture industry is the reason for 1.38 billion human lives in India and 7.8 billion human lives across the globe. Therefore, every nation has special fund assistance for this industry.
Similarly, agriculture loans in India are extended to farmers for multiple objectives, in particular, farming and irrigation related buying and other agriculture-related activities.
In addition to farmers, these loans are also offered to individuals involved in other agriculture-associated industries such as horticulture, aquaculture, apiculture, animal husbandry, floriculture, and silk farming.
Agriculture loans are given at lower rates of interest as against other types of loans available to individuals. The core aim behind these loans is to offer a helping hand to farmers to fulfil their varied cash needs.
Here, in this post, we will take you to a closer view of the benefits, types of agriculture loans in India alongside their notable features. Starting with its advantages.
Benefits of agriculture loans
There are various benefits of availing an agriculture loan: –
- Lower rates of interest
One of the significant benefits of agriculture loans is that the rates of interest are low which start at just 7% p.a.
- Instant processing
Most of the moneylenders process the agriculture loan applications within a matter of a few working days. As soon as the loan gets approved, the loan amount gets credited into the borrower’s bank account within a few working days.
- Nominal documentation
Another benefit of agriculture loan is that it demands minimal documentation. The borrower has to give only some principal documents such as identity proof, address proof, land ownership agreement, etc.
- Flexible repayment tenor
Borrowers can pay off the loan amount in accordance with their convenience.
- Zero hidden charges
One of the benefits that agriculture loans come with is that it doesn’t have any sort of hidden charges. They are highly transparent and all the associated fees are already stated.
Types of agriculture loans in India
Agriculture loans in India can significantly be classified into 4 categories:
- Kisan credit card / Crop loans
In regards to agricultural activities, there are various short-term processes like the purchase of raising crops, weeding, seeds, sowing, etc. Typically, farmers do not have an adequate amount of cash to fulfil these costs. Therefore, they reach banks often for short-term loans.
To facilitate the process, banks appeared with an innovative lending scheme called Kisan Credit Card or a crop loan. This scheme is taken in use to fund the seasonal and recurring short-term needs.
In lieu of applying for various short-term loans, farmers can utilize their Kisan Credit Cards in order to borrow small amounts constantly.
Important facts of the KCC scheme:
- All the nationalised banks and a few private banks offer the Kisan Credit Card.
- The loan can be borrowed by small farmers, sharecroppers, tenant farmers, SHGs, and others who are engaged in agricultural activities.
- The amount of fund approved for a farmer relies on various elements such as – farmer’s credit history, farm assets, size of the cultivated area, etc.
- The KCC card also renders personal accident insurance cover to the farmer and remains valid for 5 years.
- Now, several banks offer the KCC card as a smart card which the farmer can also utilize to fulfil other expenditures.
- The rate of interest is levied from 3% to 7% on the borrowed amount. Farmers can relish the lower rates of interest when they pay off the borrowed amount instantly.
- The documentation needed for this scheme is nominal. It comprises the properly filled loan application form alongside identity proof, address proof, declaration of the crops brought up, etc.
- No collateral is needed for the KCC.
- Agriculture term loan
Another type of loan in agriculture in the term loan. The term loan comes along with a longer term than the crop loan. It is offered for bigger agriculture-associated expenses such as the buying of pump-sets, machinery, improving the farm facilities, installation of solar power motors, etc.
Important facts of agriculture term loan:
- The eligibility criteria vary from lender to lender. The RBI has told banks to provide agriculture term loans up to Rs. 1 lakh without any type of collateral.
- Term loans are extended to individual farmers, sharecroppers, groups of farmers, SHGs, etc.
- Banks have structured several subcategories of agriculture term loans such as beekeeping loans, horticulture loans, dairy farming loans, etc. to serve to niche industries.
- The loan amount varies from lender to lender and the farmer’s credit reliability and repayment capability.
- The repayment tenure of agriculture term loans can range from 3 to 15 years.
- The rates of interest in agriculture term loans are comparatively lower than other sorts of loans.
- Agriculture Working Capital Loans
These loans are given to farmers and other individuals involved in agriculture-associated activities to fulfil their several working capital needs. These loans are taken in use to fulfil expenditures that are not taken care under the Kisan Credit Card scheme.
Important facts of agriculture working capital loans:
- The loan amount is comparatively higher than the amount offered in the KCC and lower than the term loans.
- Farmers and others involved in agriculture-associated activities such as seed sellers, fertiliser dealers, mechanised machinery sellers, etc. can avail the loan.
- Agriculture gold loans
As the term implies, gold loans exclusively for farmers and others associated with agricultural activities.
Important facts of agriculture gold loans:
- Interest rates are rather low; starting from 4% p.a. since it’s a secured loan.
- The loan tenor ranges from 1 month to 2 years, differs from lender to lender.
- Nominal documentation and hassle-free application procedure.
- Farmers and other individuals involved in the agriculture-associated activities can avail the loan.
- Banks extend loans up to 75-80% of the market value of the borrower’s gold ornaments.
EndNote
Besides these four major kinds of agriculture loans, there are various other categories such as forestry loans, horticulture loans, etc.
Since the agriculture sector is among the largest industries of India. To stimulate farmers to maximize the output from their lands, the Indian government facilitates national and private banks to extend several loans to benefit individuals involved in the agriculture and associated activities.
Lastly, ensure to go through and compare the different types of Kisan loan schemes, features, benefits, and rates of interest as per your needs and pick the one that suits ideal for you.
