Farmers in India incur massive expenses while cultivating crops. Most of the time, they barely make profits and struggle to repay their debts. We have heard the cries of the agriculturists in India lamenting about the low prices they get on their produce, the high cost of manure, and lack of water.
To continue farming, they land up borrowing from private lenders who charge a very high rate of interest which makes things worse. To help farmers in India by offering them financial aid when required, many banks in India offer agriculture loans.
If a farmer has a piece of land in his/her name, that can be used as a collateral to obtain a loan from a bank or a financial institution. When a borrower pledges an agricultural land for money it is called as “Loan Against Agricultural Land” or “Agriculture Loan”.
Features of Loan On Agricultural Land
Loan Against Agricultural Land is specially designed for people who cultivate crops like farmers, planters, or Horticulturists. It cannot be availed by a businessman or a professional.
Usually, the farmer does not have to furnish Income Tax Returns to apply for this type of loan.
It requires minimum documentation.
The loan tenure goes up to 20 years with many banks.
There are no hidden charges on Agriculture Loans.
The lender usually works out a flexible repayment plan considering the farmer’s situation.
The turnaround time is fast and the banks are sensitive to the harvest season.
The borrower can use the funds for agricultural purposes like food processing, buy an agricultural equipment, set up dairy units/fisheries/rice mills, or for micro-irrigation.
They can also use the funds to set up a greenhouse, cold storage, or a horticulture centre.
To buy agriculture insurance to protect from crop losses.
You can use the funds to buy livestock or cover your marketing and operating expenses.
Eligibility Criteria for Loan Against Agricultural Land
Farmers, Dairy Owners, Horticulturists, and any Orchard owners are eligible to apply for an Agriculture Loan.
Most lenders prefer the age of the applicant to be within 24 to 65 years of age. However, there are few banks who offer loans to applicants are 18 years of age. The eligibility differs from one bank to another.
If the land is owned by two people, co-applicant is mandatory.
A agricultural land is pledged as a collateral. The borrower should have clear titles to the land to be eligible to apply for a Loan Against Agricultural Land.
Usually, lenders prefer borrowers to have residence stability of 2 years.
Most banks offer loans based on the size of the land pledged. They usually mention the minimum acres of land a farmer should have to apply for a loan.
Interest Rate for Loan Against Agricultural Land
The interest rate on agri loan differs from one bank to another. You will have to contact the bank directly to know the exact interest rate that will be charged. Some of the banks providing loan against agricultural land is given below:
ICICI Bank- Agri Term Loan
Minimum Interest Rate- 10.50% p.a.
Maximum Interest rate- 13.70% p.a.
Mean Interest Rate- 11.55% p.a.
Union Bank- Loan for Agribusiness
Rate Of Interest
Loan up to Rs.50,000
Loans above Rs.50,000 to Rs.2 lakh
Loans above Rs.2 lakh to Rs.5 lakh
Loans above Rs.5 lakh to Rs.25 lakh
Loans above Rs.25 lakh to Rs.1 crore
Loans above Rs.1 crore
You will have to contact the bank for the table.
Canara Bank Agriculture Loans
Rate Of Interest
Loan up to Rs.3 lakh
Loans above Rs.3 lakh to Rs.1 Crore
Loans above Rs.1 Crore to Rs.2 Crore
MCLR+2.30% to MCLR+3.50% (Depending on type of the loan)
Loans above Rs.2 Crore (Which will be rated internally under RAM Model)
Loans above Rs.5 Crore (Based on External rating)
AAA or Equivalent - MCLR + 1.40%
AA or Equivalent - MCLR + 1.50%
A or Equivalent - MCLR + 1.85%
BBB - MCLR + 2.80%
BB - MCLR + 3.35%
B - MCLR + 3.50%
C&D - MCLR + 4.50%
IDBI Bank Agri Loans
For Term Loans up to Rs.25 lakhs (To small and marginal farmers) -
Minimum rate of interest - BBR+0.50%
Average rate of interest - BBR+0.50%.
For Working Capital and Short Term Loans above Rs.25 lakh up to Rs.3 crore (To small and marginal farmers) -
For Term Loans above Rs.25 lakh up to Rs.3 crore (To small and marginal farmers) -
Documents Required to Apply for Loan Against Agricultural Land
Duly-filled application form
One valid identity proof like your PAN Card, Aadhaar Card, or Passport
One valid proof of residence like Aadhaar Card, Passport, or Utility Bills
Land documents like registration document, taxes paid, and utility bills
No due certificate from Co-operative Credit Society (If required)
Copy of the land sale agreement
Last six months bank statement (If required)
Passport size photograph of the applicant and co-applicant
Fees and Charges for Loan Against Agricultural Land
There are many fees and charges that will be charged on your Agri Loan. Some of the most popular ones are:
A Processing Fee of 0.50% of the loan amount or Rs.3,000 whichever is higher is usually charged. However, this charge differs from one bank to another. During the festive season, many banks waive the processing fees to encourage borrowers to take loans.
Cheque Dishonor Charges
Property Insurance Charges
Statutory and Regulatory Charges
Late Payment Penalty
Valuation of the Property Fees
If you are planning to pledge your agricultural land for money, compare various loans before you choose one. Talk to the bank directly for accurate information.
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I have availed home loan directly through ICICI Bank .The rate of interest and the processing fee was very less.This loan is still active and i have not received the loan on time. It took almost 1-3 months very long process and i went to bank and given all documents. Customer service need to improve and it is not recommended .
I had a home loan from SBI and the sales executive was best because no one provides me this much low rate of interest compared to any other banks but they needs so much documents and their mortgage they do is really worst. Its due to the low rate of interest, i have selected the home loan from SBI. They have offered me a interest rate of 8.24%.
I have taken home loan from AAVAS Finance and they have provided me a interest rate of 14.5%. I have bought this loan of Rs. 8.30 lakhs and i pay EMI amount of Rs. 10,827 for the selected duration of 15 years. They do have a part payment and pre- close facility. They have sanctioned my loan in 15 days.
I have taken a home loan from Federal bank and it was a good loan experience. The loan amount was for Rs 18 lakhs with the rate of interest of 9 or 9.5% which is less when compared to all other banks. The process was quite lengthy and it took 1 month to receive the loan. Customer service was good. The tenure of this loan is 15 years .
I have taken home loan from ICICI Bank. My Instalment is of Rs 44,000/-. I lowered my Instalment Amount from Rs 44000/- to 34207/-. But Bank deducted Rs 44,000/- from my saving and adjusted Rs 34207/- and showing Rs 9793/- as excess received. Now the amount is Excess with Bank and Bank is demanding as 9.05% interest on my Principal Due including Rs 9793/- as excess deducted. I requested Bank to adjust my Excess deducted amount from my Principal Due from the date it was deducted from my account. Bank is refusing to adjust the same from the date it was deducted. I also requested Bank to refund my money back with interest, as i have to pay 9.05% interest on amount excess deducted. Bank is also refusing for same.
No body knows, that how much bank is having excess amount like this, which they have excess deducted from the customer account and not refunding it back to customer and also demanding interest on them.
It is one of the WORST BANK of INDIA. I request everyone to be careful.
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Reviewed on Jan 21, 2020
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