The dairy farm sector is among the biggest industries in rural India, and individuals who wish to start and operate their own farms or make improvements to their existing farms can now make the most of dairy farm business loans. The reasons for taking out a loan like this can be to establish small dairy units that have two to four mulch cattle, to collect, process, and distribute milk, to establish a new medium or large dairy unit, to manufacture milk products, to construct cattle shad, or to buy crossbreed or improved mulch cattle.
A dairy farm business loan is a Working Capital Term Loan that can be availed by agriculture labourers, farmers, limited companies, SHGs, registered partnership firms, and dairy co-operative societies. The amount of money that is granted to applicants can range up to Rs. 100,000 for the hypothecation of live stocks. Loan amounts offered to customers can also exceed Rs. 100,000 for the hypothecation of live stocks, or land mortgage, or declaration as per the agricultural credit act, or collateral security of sufficient worth, or third party assurance if stipulated.
The profit margin for loans up to Rs. 100,000 is nil, and loans more than Rs. 100,000 provide a profit margin ranging from 15% to 25%. The rate of interest will differ based on the lender and the structure of the loan. The repayment period is usually between five and six years, and most lenders also provide a moratorium period of two to three months.
Individuals who wish to apply for a dairy farm business loan must submit a few documents to the lender before their application can be accepted. These documents include photographs, land records, project reports and proof of identity. If the individual requires funds to establish a new small dairy unit with only two to four mulch cattle, a project report need not necessarily be required. However, project reports are essential for commercial dairy units.
The applicant will have to obtain a few security documents from the branch, including the CHA-II (Composite Hypothecation Agreement). This document should include clauses on non-diversion of securitisation and funds, or annexure as per Br Cir No 97/186 dated 8th March, 2004. Also required is the DP Note, L-515, Deed of Declaration of Land whenever required or legal or Equitable Mortgage. The applicant will also have to furnish Third Party Guarantee (OD-194), where required.