Agriculture is the backbone of Indian economy and it definitely comes as no surprise to see financial institutions offer monetary help to farmers all across the country. Agricultural loans are available for different kinds of farming-related activities.
Types of Agricultural Loans in India
One can avail a loan for the following activities related to agriculture:
- Running day to day operations
- Buying farm machinery such as tractors, harvesters
- Purchasing land
- Storage purposes
- Product marketing loans
Moreover, this financial help can be offered in form of grants and subsidies too, which are usually meant to protect the farmer in an event of crop damage or loss of crops by manmade of a natural disaster. Agricultural loans in India are not only offered to farmers working towards the cultivation of food crops, but they are available to anyone who is engaged in other agriculture-related sectors like horticulture, aquaculture, animal husbandry, silk farming, apiculture, and floriculture just to ease the working of farmers.
National Bank for Agriculture and Rural Development (NABARD)
In India, all premier banking and financial organizations, at all levels, offer a great deal of financial help to farmers. However, this trend of boosting the rural economy and agriculture through financial credit was started by the National Bank for Agriculture and Rural Development (NABARD) back in the early 1980s.
This financial institution is working in conjunction with the Government of India to boost the agriculture sector. It is credited with several innovative schemes that have immensely aided the farmers throughout the country. The most notable scheme launched by the NABARD is the Kisan Credit Card (KCC).
The NABARD has also helped greatly in developing a couple of other schemes, targeting specific sectors. A few of them are listed below:
- Dairy Entrepreneurship Development Scheme: This scheme is meant to promote the dairy sector, specifically by setting up modernized dairy farms, promoting calf rearing, provide infrastructure, upgrading logistical operations to improve the product on a commercial scale, and generate self-employment.
- Rural Godowns: The main objective of this scheme is to help farmers throughout the country by providing them with godowns. This will, in turn, improve their holding capacity drastically and as a result, they will be able to sell their produce at fair rates, rather than selling them in distress. In addition to this, with a nationalized warehouse system in place, the marketing of agricultural produce becomes simpler.
- Loan Against Warehouse Receipts: Warehouse receipt financing serves as a foolproof way to prevent distress sales. When a farmer needs funds, post-harvest, all he has to do is store his produce in a Warehousing Development and Regulatory Authority (WDRA) accredited warehouse, which in turn issues him a receipt. This warehouse receipt mentions important details like quality and quantity of the product and can be used to get credit from banks, up to 70 per cent of the collateral value.
- Solar Schemes: These schemes were implemented in order to reduce dependence on grid power by promoting the use of solar equipment. The idea here is to replace diesel pumps with solar ones, considering that they have low operating costs and are environment-friendly.
Kisan Credit Card Scheme
- The Kisan Credit Card is a scheme launched by the Indian banks back in 1998, as a way to fulfil the financial needs of the agricultural sector. This is done by giving monetary aids to farmers, which in turn comes with various features and benefits. The quantum of the loan depends on several factors like cost of cultivation, farm maintenance cost, et cetera.
- This has been particularly beneficial for those farmers who are not aware of the banking practices. Moreover, it is meant to protect farmers from harsh and informal creditors, which may land them in a massive debt.
- The farmers can use the KCC card to withdraw funds for the purpose of crop production and domestic requirements.
- Applying for the KCC is a simple, hassle-free process that requires minimal documentation. It also offers crop insurance coverage, along with subsidies on interest payments. Speaking of interest, farmers applying for loans under the KCC scheme can borrow funds at 7 per cent per annum, for amounts up to Rs. 3 lakh.
- The Kisan Credit Card is linked to the farmer’s savings account and all the transactions are done under a single account. Additionally, any credit balance in the KCC account earns interest. All farmers can apply for a KCC and if you are looking to apply for one, then visit your nearest bank for more information.