Agriculture Loan Interest Rate

Agriculture is one of the major contributors in India’s economy. To empower farmers, banks and co-operative societies have offered agriculture loans with various benefits. Let us take a look into the agriculture loans in depth studying about their features, interest rates, eligibility criteria, benefits, etc.

What Are Agriculture Loans?

Agricultural activities are time consuming, labour-intensive and expensive. In order to help small farmers, banks and co-operative societies offer short term and long term loans at a nominal rate of interest. Agriculture loans offered to farmers to meet their expenses related to farming activities such as purchasing of agricultural land, agricultural tools, storing produce, transport of produce, hiring labour. Since the government considers agriculture as a sector of national importance, it ensures through various initiatives that there is a substantial credit flow to farmers.

Agriculture Loan Interest Rates

Agriculture loans can be availed at nominal interest rates from commercial banks – private and public and co-operative societies for investment and production purposes. Apart from the interest charged, some banks may charge one time processing fee which may vary from nil to 4%.

Interest rates on agriculture loans vary from 8-14%, depending on the lender, type of loan taken and the amount. This interest rate also changes in line with movement in the Reserve Bank of India’s repo rate.

The government also offers interest subvention of 1.5% on farm loans below Rs 3 lakh. This means the interest rate being charged by lender, the government will bear 1.5%.

Other Fees For Agriculture Loans

Apart from the interest rates, farmers may also have to bear additional charges.

• Foreclosure Charges –

These are levied when the loan is pre-closed by paying the balance amount before the end of the loan term.

• Processing Fee –

These are one time charges which are deducted from the loan amount sanctioned before the loan is disbursed.

• Late Payment Penalty –

These are levied when the borrower does not pay the loan EMI in the scheduled period of time.

• Bounce Charges –

They are charged when the cheque issued for loan EMI payment bounces.

• Stamp Duty Charges –

It is one time fees which is charged at the time of loan disbursal and is charged as per the state laws.

• Documentation Charges –

They are charged at the time of loan sanction.

• Valuation Charges –

It is levied if the bank values the agricultural/residential/commercial property of the borrower.

Where To Apply For Agricultural Loans In India?

Under several initiatives undertaken by the Government of India, almost every commercial bank and co-operative society offers agriculture loans. The lenders need to keep transparency in the processing and documentation of the loan so as to provide a hassle free loan to the farmers. Some of the popular lenders are –

• State Bank of India –

State Bank of India has the advantage of its expansive nationwide network in both urban and rural areas. It offers a wide array of agriculture loan schemes like

◦ Crop loans
◦ Loans against warehouse receipts
◦ Produce marketing loan scheme
◦ Agriculture term loans
◦ Kisan gold card scheme
◦ Dairy plus scheme
◦ Kisan credit card scheme
◦ Land development scheme
◦ Financing to aid purchase of combine harvesters, mechanisation and other equipment
◦ Finance for horticulture, dairy farms and more

• Nationalised banks –

Following banks provide agriculture loans at low interest rates

◦ UCO Bank
◦ Punjab National Bank
◦ United Bank of India
◦ Syndicate Bank
◦ Allahabad Bank
◦ Oriental Bank of Commerce
◦ Indian Bank
◦ Bank of Baroda, etc.

• NABARD/ Co-operative Agricultural Bank Loans –

National Bank for Agriculture and Rural Development and other co-operative societies offer farmers term loans, micro finance and other loan schemes at an attractive rate of interest.

Features And Benefits Of Agriculture Loans

• Attractive Interest Rates –

These loans are offered to farmers at a comparatively lower rate of interest thus reducing the overall cost of the loan and burden on the farmer to repay the loan.

• Minimal Documentation –

To avail agriculture loans farmers have to produce very few documentation for KYC like photo proof, ID proof, residence proof and so on.

• Quick Processing –

The agriculture loans are processed quickly and disbursed directly into the borrower’s bank account.

• Flexible Repayment Options –

Farmers can opt for long-term or short-term loans depending upon their repaying capacity.

• No Hidden Charges –

There are no hidden charges such as foreclosure charges levied on the loan.

Conclusion

Several banks and co-operative societies offer agriculture loans at attractive rate of interest to farmers to aid in their agricultural expenses. The borrower should compare the options available in order to make an informed decision. The repayment terms should be planned to suit the repaying capacity of the farmer.

IIFL Finance provides loans through a fully digital process that can be completed within minutes from anywhere. More importantly, it offers customised loan options to farmers to ensure the funds to meet their capital requirements. The disbursement and repayment are in line with the sowing and harvesting periods.

Frequently Asked Questions

1. What are the various types of agriculture loans?
Ans- There are several types of agriculture loans like term loans, crop loans, short term loans, gold loans for agriculture, etc. 

2. Can agriculture loans be applied by an NRI?
Ans- No. Agriculture loans can be applied by resident Indians. Agriculture loans for NRIs can be applied if they are as per the guidelines of the lenders.

3. What are processing charges for agriculture loans?
Ans- Processing charges are part of every loan sanctioned by any lender. These charges are levied as a percentage of the loan sanctioned.