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Answers
Answer:
Agriculture loans in India are offered to farmers for various purposes, like farming and irrigation equipment purchases, crops for cultivation, and other agriculture-associated activities. Besides farmers, these loans are also available to individuals engaged in other agri-related sectors like animal husbandry, horticulture, apiculture, aquaculture, silk farming, and floriculture.
Agriculture loans are offered at lower interest rates compared to other loans available to individuals. The main objective of these loans is to provide a helping hand to farmers to meet their various cash needs.
Here, in this guide, let’s take a closer look at the types of agriculture loans in India, how to apply, benefits, FAQs, and more.
When it comes to agricultural activities, there are multiple short-term processes like the purchase of seeds, sowing, raising crops, weeding, etc. Generally, farmers don't have enough cash to meet these overheads. Hence, they approach banks frequently for short-term loans.
To simplify the process, banks came up with an innovative lending scheme known as Kisan Credit Card or a crop loan. This scheme is used to finance seasonal and recurring short-term requirements.
Instead of applying for several short term loans, farmers can use their Kisan Credit Cards to borrow small amounts regularly.
Notable Features of the KCC Scheme:
All nationalised banks and some private banks offer the Kisan Credit Card.
The loan can be availed by small farmers, sharecroppers, tenant farmers, SHGs, and others involved in agricultural activities.
The amount of finance sanctioned for a farmer depends on several factors like – credit history of the farmer, farm assets, size of cultivated area, etc.
The KCC card also offers personal accident insurance cover to the farmer and is valid for 5 years.
Today, several banks offer the KCC card as a smart card that the farmer can also use to meet other expenses.
The interest rate charged on the amount borrowed ranges from 3% to 7%. Farmers can enjoy lower interest rates when they repay the borrowed amount quickly.
The documentation required for this scheme is minimal. It includes the duly-filled application form, ID proof, address proof, declaration of the crops raised, etc.
No collateral is required for the KCC.
Agriculture Term Loan
The term loan has a longer tenure than the crop loan. It's provided for larger agriculture-related expenditures like the purchase of machinery, pump-sets, upgrading the farm facilities, installation of solar power motors, etc.
Notable Features of Agriculture Term Loans:
The eligibility criteria vary from one bank to another. The RBI has notified banks to offer agriculture term loans to Rs. 1 lakh without any collateral. Term loans are provided to individual farmers, sharecroppers, groups of farmers, SHGs, etc.
Banks have created various subcategories of agriculture term loans like horticulture loans, beekeeping loans, dairy farming loans, etc. to cater to niche sectors.
The loan amount ranges from a few thousand rupees to tens of lakhs of rupees, depending on the lender, the creditworthiness and repayment capacity of the farmer.
The tenure of agriculture term loans ranges from 3 to 15 years.
The interest rates of agriculture term loans are competitive and less when compared to other loans in the market.
Agriculture Working Capital Loans
As the name implies, these loans are offered to farmers and other individuals engaged in agri-related activities to meet their various working capital requirements. These loans are used to meet expenses that are not covered by the Kisan Credit Card scheme.
Notable Features of Agriculture Working Capital Loans:
Objective – To meet the working capital requirements of farmers.
Loan Quantum – Higher than the amount offered in the KCC and lesser than term loans.
Eligibility – Offered to farmers and others engaged in agri-related activities like seed sellers, fertiliser dealers, mechanised machinery sellers, etc.
Note that some banks offer the facility to increase the amount provided in the KCC scheme, so that farmers can use it, instead of going for a working capital loan.
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