A majority of the Indian population resides in rural areas. Hence, farming is the main occupation and a crucial part of the Indian economy. You can find all kinds of crops grown here. However, farmers always face the challenge of weather unpredictability. To tackle that, the government has taken several measures to protect the farmers from specific challenges and problems, such as crop loans, irrigation facilities, equipment, livestock purchasing, etc.
The cultivation process requires a lot of expenditure; it can be difficult for farmers to invest such an amount. So, the government offers crop loan schemes to farmers so that they can cultivate crops without worrying about expenditure, and once the harvest is done, they can start repaying the loan. The loan amount depends on the land area and crop type.
Identify the Purpose
Farming is an industry that majorly depends on the weather conditions. The unpredictability of weather often causes disturbances in farming routines. These disturbances lead to financial losses for the farmers. Moreover, after the crops are harvested, farmers require facilities like warehouses, cold storage facilities, and transportation for crop storage. A farmer cannot independently spend on these resources. Hence, they need crop loans.
Before applying for a crop loan, a farmer must identify his requirements to get the needful amount.
Here are some everyday purposes covered in different crop loan schemes:
- Crop cultivation credit requirements
- Post-harvest storage expenses
- Post-production marketing
- Cropping maintenance and equipment usage
- Other allied activities
Check the features covered in the loan scheme
Many banks like SBI, Union Bank, Kotak, and ICICI Bank offer crop loan schemes for farmers. All these schemes will have different features. So, before choosing one bank, farmers must go through the features covered in each scheme and, as per their requirements, choose one out of the options. For example, the amount and conditions of these loans depend on the type of crop being cultivated and the size of the area under cultivation. It also depends on the market value of the crops; if the crops have a high demand in the market, the farmer can get a high loan amount. If a farmer wants to incorporate the use of modern farming equipment, the crop loan schemes often have encouraging features for it. Banks offer different types of disbursement facilities. For example, SBI offers a Kisan Credit Card, which they can use for various purposes.
Check for Eligibility
There are four eligibility criteria that farmers have to follow.
- All farmers who are individual or joint farm owners can apply for a crop loan.
- All farmers who are tenants, farmland lessees and sharecroppers can apply for a crop loan.
- Farmers associated with Self-Help Groups and Joint Liability Groups can apply for a crop loan.
- Farmers who fall between the age limit of 18 and 70 years of age can apply for a crop loan.
Check Interest Rates and Repayment Terms
The interest rates can differ in different crop loan schemes by different banks. It can also vary based on the farmers’ credit score. For example, if a bank offers a 9% fixed interest rate on the amount of 3 lakhs, the farmer can get a 3% concession if he has a good credit score.
In the case of repayment, the banks decide a tenure based on the type of crop, its estimated harvest and marketing cycle. There are provisions for increasing the term and credit amount based on the farmer’s requirements.
Check for Government back-ups
The banks can offer loans under two conditions: with government tie-ups and non-tie-ups. According to RBI guidelines, a bank can offer up to 3 lakhs without any security if it has a government tie-up. But in case of non-tie-ups, the bank can only offer 1 lakh as a loan without security.
After understanding all the points mentioned above, any farmer can easily apply for a crop loan from any bank of his choice.