Loan Schemes for Farmers to Purchase Land in India

Government of India eased ways to secure credit for farmers to purchase agriculture land in India. Government is striving to confront the problems faced by farmers in agriculture sector. To ensure liquidity in the agriculture sector banks provide loans at low rates to purchase land for future and current farmers in India.

Agriculture Land Purchase 

Realizing the plethora of problems, the government initiates an array of the solution employing agricultural loan schemes. One such loan scheme is banks offering term loans for Agricultural land Purchase. Consequently, this improves productivity in the agricultural sector aiding in the economic advancement of the country. Further, most importantly assists marginal, individually small, tenant farmers with acquisitions of land for agriculture purposes. Moreover, helps to use uncultivated and wasteland for farming. Thus, the bank offers loans from Rs 50,000 to 10 lakhs with longer repayment options.

Two Different Agriculture Land Loans  

In certain cases, farmers obtain a loan against their land. That is, using the land they possess as collateral security to acquire a loan. In contradiction to the Agriculture land purchase that is issuing the loan to acquire a cultivation land. Accordingly, pledging a land for the loan is easily distinguishable from the loans to attain land.

Objectives of the Loan Scheme for Agriculture Land Purchase 
  1. Aiding varieties of farmers to purchase land
  2. To increase agricultural productivity
  3. Usage of fallow lands for farming
  4. Easy loan accesses for purchase of land
  5. To diversify the current activities while encouraging other agronomic sectors

Individuals that have taken up farming and allied sectors are eligible for loans. Thus, the following are eligible to concur a loan via agriculture land purchases:

  1. Small and marginal farmers (owns less than 5 acres of dry land or 2.5 acres irrigated land even after the purchase of land from loan)
  2. Sharecroppers and tenant cultivators (same as the above)
  3. Entrepreneurs with agricultural background
Collateral Security  

Every form of loans will consist of two things

  1. Margin- in this case, it is 20%
  2. Security- in case of loans below Rs 1,00,000 hypothecation of assets and crops from the finance. However, loans above that also require a mortgage of properties.

Considering the complications of farmers and cultivation, the repayment takes longer than usual. Thus, this loan scheme for agriculture land purchase allows ample time for a refund. Accordingly, the applicant should settle the loans in a period of 7 to 10 years. This time would include the moratorium period (gestation period). Further, interest may be issued during this gestation period, but interest will be issued yearly or every ½ year during the rest of the repayment payment. Furthermore, on extra development of land, the bank shall extend the loan repayment schedule. Note, fix the repayment schedule in the initial stages to avoid the commotion. 

Rate of Interest 
  1. Up to Rs 50,000- MCLR plus 0.50%
  2. More than Rs 50,000 to Rs 5 lakhs- MCLR plus 1%
  3. More than Rs 5 lakhs to 10 lakhs- MCLR plus 1.5%
Documents Necessary 
  1. Land documentation (certification from revenue authorities)
  2. No due certificate (Cooperative credit society or Commodity Boards Financial institutions)
  3. Documents of title 
  4. Supporting documents as proof to right over the land 
  5. Sale agreement copy (vendor and applicant)
  6. Simplified application (only loans below 3 lakhs)
  7. Additional documents specified by the respective bank 

The processing charge will be nil for loans up to Rs 25,000 but above that, the decision is taken by the banks.

The Agriculture land purchase loan is offered by many banks including: 
  1. Union Bank of India
  2. Canara Bank
  3. Bank of Baroda (Vijaya bank)
  4. IDBI bank
  5. Central Bank of India
  6. State Bank of India and more

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