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Agricultural Loan Interest Rate Research Team | Posted On Wednesday, October 17,2018, 06:08 PM

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Agricultural Loan Interest Rate



Agricultural loan helps farmers run their farms efficiently. With the rising cost of seeds and fertilizers, it gets difficult for farmers to keep up with the cost of farming and production. The farmers can avail these loans offered at a lower rate of interest to stay afloat. The agricultural loan helps the farmers fund seasonal agricultural operations and activities like animal farming, purchase of agricultural tools, seeds and fertilizers, pisiculture and purchase of land. The additional costs incurred by the farmers like storage and transportation are also included in the agriculture loan.

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Agricultural Loan Interest Rate

What is agriculture loan?

An agricultural loan is a specific financial instrument that empowers farmers for the upkeep and maintenance of farms and helps them prosper and grow. The agricultural loan can be availed at a lower interest rate along with other subsidies that help farmers, make a profit. The Union Government also backs some of these schemes that fall under the category of agriculture loan. In India most of the commercial banks and co-operative societies provide loans in rural as well as in urban areas. As agriculture is one of the main components of the Indian economy, the agricultural sector is given priority vis-a-vis lending status. Banks and other financial institutions offer agricultural loans at a lower rate of interest as compared to other loans.

Types of agricultural loans:

There are five main categories of agricultural loans. They are as follows:

  1. Farm operating loans: as the name suggests these loans help in the upkeep and maintenance of farms or can be availed for expansion purpose.

  2. Farm ownership loans: these loans are availed for buying agriculture machinery and livestock.
  3. Warehousing loan: these are also known as farm storage facility loans. They can be availed for the storage of agricultural produce mainly non perishable products.
  4. Fisheries finance program: this loan program is designed to benefit the fish production from the brackish and marine waters and also fresh water fishing. The loan is provided for buying fish food, fish net and other equipments. This helps the farmer generate additional income.
  5. Other agricultural loans: these loans are provided for other agriculture related activities like crop damage, seasonal agriculture, grants and so on. This also includes housing and community program loans offered to families living in rural areas. The farm credit service provides loans for homes in rural and agricultural areas.

Documents required for agriculture loan:

Banks and co-operatives sanction both, long term and short term loans to farmers. Documentation for agriculture loan is relatively simpler to make the process hassle-free and less complicated for the farmers. However, the banks require basic documentation to sanction the loans:

  1. Identity proof – voter ID, ration card, Aadhaar card.
  2. Residence proof
  3. Land ownership proof – records of rights, revenue receipt.
  4. Kisan credit card

These are the basic documents required for this loan. However, the banks in their own capacity can ask for additional documents.

SEE ALSO: Pradhan Mantri Mudra Yojana

Agricultural loan eligibility:

This loan is extended to all farmers in the country who cultivate agricultural land. The applicant must be of the age group of 18- 70 years. Agricultural loans are offered to small and medium farmers, tenant farmers, sharecroppers and oral leases. No security is required to avail a crop loan up to Rs 1 Lakh.

How to calculate EMI for agricultural loan?

The EMI of your loan depends on the following factors:

  • Amount of loan
  • Rate of interest
  • Tenure

EMI= (P*1)*(1+I) ^N/ [(1+I) ^N-1]


1. P stands for principal amount,

2. I stands for interest and

3. N stands for the number of installments.

How much agricultural loan can be availed?

Crop loans of Rs 3 Lakhs or below carry an interest rate of 7% a year. For farmers who repay loans in a short time, the government provides interest subversion of 3% a year.  For Crop loan amounts of Rs 1 Lakh, no collateral is required. Post harvest loan is available at an interest rate of 7% with interest rate subversion. Loans for agricultural land purchases are also available. However, the interest varies from time to time.

Union budget on agricultural sector:

The Union Budget focuses on improving the cash economy of the country: the highlights of the Union Budget (2018-19) are as follows:

  • The objective of the Union Budget is to help farmers make more profits from the same plot of land, by obtaining a minimum of 50% more than their initial investment on crops.
  • In case the market price of the agricultural produce falls below the minimum support price (MSP), the government is liable to purchase the produce at MSP or help the farmers receive MSP with the help of Niti Aayog.

The Finance Minister announced that the rural haats will be converted and upgraded to Gramin Agricultural Markets where the farmers can directly sell their produce to customers.

An infrastructure fund of Rs 2000 Crores will be allotted to the development of the Gramin Agricultural market and the APMC committees.

The government will bring forth a committee that will revise the policies and also impose new policies keeping in mind demand and supply. The committee will also take decisions related to imports and exports of the country.

The government will further encourage and fund cluster based development to improve the chain of production and marketing.

  1. For the development of fisheries and to promote animal husbandry the government will allocate Rs 10,000 Crores.
  2. The budget proposed a rise in institutional credit for the agricultural sector.
  3. The budget emphasized the adoption of solar based systems for agricultural purposes. The government will encourage companies to purchase the extra power generated by the farmers to promote the use of solar system in agriculture.
  4. The budget allocated a corpus of Rs 200 Crores for the development of cottage industries.
  5. Kisan Credit Cards will be offered to small and marginal farmers, fisheries and animal husbandry.
  6. The allocation for the Ministry of food processing amounts to Rs 1400 Crores.
  7. The Government will allot Rs 500 Crores for agricultural logistics, farmer producer’s organizations and processing facilities.

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