Agricultural loan. Agricultural loans are available for a multitude of farming purposes. Farmers may apply for loans to buy inputs for the cultivation of food grain crops as well as for horticulture, aquaculture, animal husbandry, floriculture and sericulture businesses. There are also special loans to finance the purchase of agricultural machinery such as tractors, harvesters and trucks. Construction of biogas plants and irrigation systems as well as the purchase of agricultural land may also be financed through special types of agricultural finance.
Here is some information about the kind of agricultural credit and loans provided by public sector banks in India. In 1981, the government came out with the National Bank for Agriculture and Rural Development Act that lead to the formation of National Bank for Agriculture and Rural Development (NABARD) – External website that opens in a new window. This organization is responsible for the flow of credit to agriculture and related industries. In the late 1990’s, the government launched the Kisan Credit Card Scheme in consultation with the Reserve Bank of India and NABARD.
This scheme is meant to meet agricultural expenses of crop production, cultivation and contingency. It allows unlimited withdrawals and repayments. The adaptation of the Kisan Credit Card Scheme by different banks has lead to easy availability of agricultural credit and an increase in agricultural productivity. Other than this scheme, nationalised banks offer a variety of other agricultural loan options. Introduction of agricultural loan. The Hon’ble Union Finance Minister announced a package on 18 June 2004 to give a boost to agricultural credit and emphasised the need to double the agricultural credit in three year period.
The agricultural policy of the Government of India envisages substantial credit flow to increase agricultural production and productivity. Banks provide term finance to farmers for development purposes and short term loans for production purposes. There is also a need to finance farmers for purchasing land to expand activities and make existing small and marginal units economically viable. This would enable farmers to diversify their present activities and take up allied activities. Objectives of agricultural loan. To make the small and marginal holdings economically viable * To bring fallow lands and waste lands under cultivation * To step up agricultural production and productivity * To finance the share croppers / tenant farmers to purchase land to enable them to increase income Margin. No margin is prescribed for loans upto Rs. 50000. In case of higher loans, the margin will be minimum of 10%. (as against the earlier stipulation of 20%)Reduction in margin will enable small and marginal farmers to avail higher quantum of loan as they may find it difficult to bring in higher margin money.
Security. The land purchased out of the bank loan and mortgaged in favour of the bank will form the security for the loan from borrowers. Eligibility. (i) Small and marginal farmers i. e.. those who would own maximum of non- irrigated or irrigated land, (ii) Share croppers / Tenant farmers. Quantum of loan. It will depend on the area of the land to be purchased and its valuation and also development cost. Repayment period. Loan may be repaid in 7 – 12 years (as against the earlier stipulation of 7-10 years) in half yearly / yearly instalments including a maximum moratorium period of 24 months.
The moratorium period may be fixed taking into account the gestation period of the project and cash flow. Increase in repayment period upto maximum of 12 years, will provide some relief to the small farmers towards repayment of loan. Repaying Capacity . The financing bank should satisfy itself that the borrower/s would have adequate income surplus from their production activities on the land being purchased and other income to repay the bank loan with interest and the repayment period may be fixed accordingly.