Agricultural loans are loans that are offered to large/small farmers, tenant farmers, sharecroppers, and other individuals who are engaged in agricultural activities. These loans are provided by all the national banks and various private banks to farmers who need monetary help with farming-related activities like irrigation, buying and raising crops, land purchasing, buying various agricultural tools, etc. These loans are also available for individuals who work in agriculture-related sectors like horticulture, pisciculture, animal farming, silk farming, etc. The purpose of agricultural loans is to provide a helping hand to financially weak farmers who made monetary help to get their farm business up and running.
The government has created several schemes over the years to help farmers meet their cash demands related to agriculture. Banks provide both short-term as well as long-term goals depending on the needs of the farmers. Agricultural loans have proven to be of tremendous help to farmers in the agriculture business. These loans provide financial support to farmers with affordable interest rates.
Some of the ways that agricultural loans have proven to be helpful to farmers are listed below-
- Lower interest rate – The most important feature of agricultural loans is that they can be availed to the farmers at low-interest rates. The interest rate on agricultural loans is less than 8% per annum. The “low-interest-rate” feature is what draws farmers to agricultural loans in the first place because if the interest rates were kept high, the farmers would never be able to afford the loan. This feature helps take some financial burdens off of the farmers.
- Less paperwork – The loans provided by banks always include paperwork and the entire “paperwork” process can sometimes be quite a hassle. Agricultural loans require minimal paperwork as a result of which the process becomes simple and convenient. The borrower has to fill the application form and provide essential documents like photo identity proof, address proof, and proof of land ownership, etc.
- Agricultural loans help the farmers get their farm business up and running. The monetary help that the farmers receive in the form of agricultural loans can help the farmers buy farm equipment, machines, various agricultural tools, and other agriculture-related activities.
- Financially weak farmers can benefit the most from agricultural loans as they are the ones who need financial help the most when it comes to setting up their agricultural farms.
- Agricultural loans are useful for purchasing lands – Land purchasing requires a massive amount of money. Money that is not readily available to an individual let alone a poor farmer. Agricultural loans ensure that farmers can purchase their land with ease. Farmers will need to provide collateral in case their agricultural loan exceeds one lakh rupees.
- Refinance – Banks also provide the option of refinancing. Refinancing can help farmers in paying off the old debt by replacing the old loan with a new one. The only difference between the two loans is that the new loan will have a lower interest rate than the previous one.