Agriculture has long been the backbone of India's economy, employing a significant portion of the population and contributing to the nation's growth. However, the agricultural sector often faces challenges related to funding, modernisation and infrastructure development.
To address these challenges, agricultural credit assumes great importance and loans against agricultural land have emerged as a financial tool that can provide much-needed support to farmers and landowners.
However, to determine its true impact, we need to study the loan against agricultural land trends in India. As per a report by NABARD, agricultural credit disbursement in India increased from Rs. 46,268 crores in 1999-2000 to Rs. 13,92,729 crores in 2019-20.
Let’s understand the trends of loans against agricultural land in India, exploring its benefits, trends and ways to increase the chances of securing such loans. Before that, what is a loan against agricultural land?
What Are Loans Against Agricultural Land?
A loan against agricultural land is a type of loan against property that involves using one's agricultural land as security to secure a loan from a financial institution. This type of loan allows farmers and landowners to unlock the value of their land to fund various agricultural activities, investments or even personal needs. The land's market value becomes the basis for determining the loan amount and the borrower agrees to repay the loan amount along with interest within a specified period. In case of non-repayment, the lender can take possession of the agricultural land.
Why You Should Take a Loan Against Agricultural Land?
Like any other secured loan, a loan against agricultural land in 2023 offers several benefits to the borrowers including but not limited to the following:
- Access to Capital: Land blocks a significant amount of capital. Loans against agricultural lands provide an opportunity to liquidate the much-needed blocked capital for agricultural activities such as purchasing equipment, seeds, fertilisers and machinery.
- Modernisation: The loan can be used to invest and modernise farming techniques. These include investing in modern farming techniques, irrigation systems and other infrastructure improvements that enhance productivity.
- Diversification: Farmers can use the loan funds to diversify their income sources such as livestock farming or setting up agribusiness ventures.
- Emergency Funding: In times of crop failure, natural disasters or any other emergency, a loan against agricultural land can provide a safety net to meet up the financial needs and contingencies.
What Are the Loan Against Agricultural Lands Trends in India?
Here are some of the current loans against agricultural land trends that India is witnessing:
- Government Initiatives: The Indian government has introduced various schemes to support farmers including subsidising interest rates on agricultural loans and offering debt relief in certain cases.
- Growth of Institutional Credit Flow: The institutional credit flow to the agricultural sector in 2019-20 in India was approximately Rs. 13.93 lakh crores against the targeted Rs. 13.50 lakh crores. This includes Rs. 5.68 lakh crores of long-term credit and Rs. 8.25 lakh crores of short-term credit.
- Digitisation: Credit penetration in non-urban areas is increasing and the agricultural sector is gradually catching up. The digital transformation in the banking sector has led to more efficient and accessible loan application processes for farmers, reducing paperwork and processing time.
- Awareness and Education: Organisations and government bodies are conducting workshops and training sessions to educate farmers about loan options, repayment terms and financial management. This helps them make informed decisions about how to utilise the loan proceeds.
- Fintech Evolution: More and more startups are evolving that are providing increased access to agricultural credit in India. The aim is to help farmers provide the necessary funds for agricultural activities.
How to Increase the Chances of Loans Against Agricultural Lands in India?
You can increase your chances of getting a loan against agricultural lands in 2023 by following the below tips:
- Maintain Clear Documentation: Ensure that you have all the necessary land ownership documents including land titles, revenue records and legal permissions, readily available.
- Improve Credit Score: Credit score is one of the most important criteria for getting loan approvals. A good credit score demonstrates your creditworthiness and increases your chances of getting a loan on favourable terms. Also, demonstrating a history of timely loan repayments can build your credibility and increase your chances of securing future loans.
- Use Case: What is the intended purpose to raise the loan? You might be required to provide the use case of loan proceeds by some financial institutions. A good use case will further enhance the chances of getting the loans.
- Collateral Assessment: Your land value will determine the amount of loan you can get. The land value may be higher for irrigated agricultural land and thus, provide more financing than non-irrigated land. You should try to get a professional assessment of your land's market value to determine the loan amount you can secure.
- Income Sources: If you have moderate to good income or multiple income sources, then it demonstrates increased chances of loan repayments. Thus, it will directly increase your chances of loan approvals.
Summing Up
A loan against agricultural land in 2023 serves as a lifeline for farmers and landowners, allowing them to harness the value of their land to improve their agricultural practices and address financial needs. As India's agricultural sector undergoes transformation and modernisation, the loans against agricultural land trends reflect the changing landscape of rural financing.
By understanding these trends, being aware of government initiatives and maintaining a strong credit history, farmers and landowners can secure loans that enable them to unlock the true potential of their land and contribute to the growth of the agricultural sector.
TATA Capital provides one of the most affordable loans against property that you can apply to avail of affordable financing. With a high loan-to-value ratio, flexible terms and affordable interest, TATA Capital is the borrower's choice for property-based lending. Apply now for affordable loans against property!
FAQs
Q: What are the latest trends in loans against agricultural land in India in 2023?
A: In 2023, the trends of loans against agricultural land in India are notably characterised by digitisation and convenience. Financial institutions are increasingly adopting online application processes, making it easier for borrowers to apply for loans and submit necessary documents digitally. Additionally, government initiatives aimed at supporting the agricultural sector through subsidised interest rates and debt relief continue to play a significant role.
Q: What is the future of Loan Against Agricultural Land in the Indian lending market?
A: The future of loans against agricultural land in the Indian lending market appears promising, driven by various factors. The government's continued emphasis on agriculture is expected to result in sustained support for farmers through accessible credit options. Technological innovations will likely reshape the lending landscape with increased integration of online platforms, AI-driven assessments and remote property evaluations. The nature of loan products is anticipated to become more specialised.
13 September 2023
6 mins read
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