Agri Eco

The agriculture sector in India is one of the biggest employers of labour force and grew at
3.9 per cent in 2021-22. With such a large percentage of the population employed in
agriculture or allied sectors, agricultural finance plays a significant role in supporting
activities related to farming and other allied aspects such as production or processing and
marketing of produce.
The sources of agricultural finance in the country are broadly classified as institutional
and non-institutional sources. Institutional sources are related to institutions such as
cooperatives, regional rural banks (RRBs) or scheduled commercial banks (SCBs). Non-
institutional agricultural finance refers to financing support offered by traders, money
lenders or other individuals like agents, landlords or even family members.
Institutional Sources of Agricultural Finance in India

 Co-operative societies
Co-operative societies offer the least expensive loans for agriculture and related activities.
Primary Agricultural Co-operative Societies (PACS) are among the oldest forms of agri
finance in India and provide short and medium-term loans for agricultural activities.
Long-term loans are provided by Primary Co-operative Agriculture and Rural
Development Banks (PCARDBs). State Co-operative Agriculture and Rural Development
Banks (SCARDBs) also offer long-term loans.
 Land Development Banks
Among the various sources of agricultural finance in India are land development banks.
Also called land mortgage banks, they are registered under the Co-operative Societies
Act. In some states, they are known as Agricultural and Rural Development Banks
(ARDBs). These banks offer long-term loans with land as collateral.
 Commercial Banks
While co-operative societies offer credit to farmers in need of finance, commercial banks
also offer credit to farmers in need of financial support. Scheduled commercial banks
offer loans to farmers for buying farm equipment and costs related to activities after
harvest. Loans are also offered for dairy and fisheries. Banks offer Kisan Credit Cards,
which can be used for the withdrawal of cash at an ATM. The Kisan Credit Card scheme
was introduced in 1998 in order to enable credit easily for farmers.
 Regional Rural Banks
One of the essential sources of farm finance is regional rural banks, which are scheduled
commercial banks owned by the government. They were set up based on the
recommendations of the Narasimhan Working Group in 1975, followed by the Regional
Rural Banks Act, 1976.
 Micro Finance
Micro finance is another option that farmers who don’t have access to credit via banks
and financial institutions or those who don’t have adequate collateral can fall back on.
Micro finance involves small loans with no collateral and is provided by Microfinance
Institutions (MFIs).
 Non-Banking Financial Companies
Apart from all these various sources of agricultural finance in India, there is one more
significant source – the NBFC. Backed by online and easy-to-use app-based platforms, an
NBFC takes banking and credit to those farmers not touched by mainstream banking.
Role of NABARD
Among the sources of farm finance to banks and institutions in India is the National Bank
for Agriculture and Rural Development (NABARD). NABARD offers refinance to
regional rural banks, state co-operative banks, district central co-operative banks and state
governments as well.
Non-institutional Sources of Agricultural Finance in India

Moneylenders, family and friends, traders, landlords or commission agents are non-
institutional sources of agricultural finance.
 Moneylenders, Agents, Traders and Landlords
Moneylenders have for decades served as the source for many agricultural families in
India’s rural credit landscape. However, the interest rates are high and moneylenders have
in many instances pushed families into a debt trap. The same applies to landlords who
also charge high and unsustainable rates of interest. Commission agents or traders also
offer finance to farmers but interest rates are relatively high when compared to
institutional sources of farm finance.
An easy alternative is to look for small business loans , available on Bajaj MARKETS, at
convenient interest rates. What’s more, the loan can be availed online in a hassle-free
manner.
 Relatives and Friends
Although relatives can prove to be of help, they may help us in case of financial
emergencies and not frequently.
Agriculture is a crucial sector of the country’s economy and contributes to employment
and the nation’s GDP. The importance of farm credit and financing is vital for adopting
the best agricultural practices and boosting production. Although non-institutional sources
of farm income have been available for decades now, interest rates are high and there is a
lack of proper documentation. Customised loan products, made available by NBFCs
empowered by technology, have ensured that farmers now have access to institutional
credit.
Agriculturists can now opt for loans made available by commercial banks, rural banks,
land development banks, microfinance institutions or NBFCs to avail loans. Business
loans, available on Bajaj MARKETS from various partners, come with affordable rates of
interest and zero collateral. These loans are available at the click of a button and come
with flexible repayment options.

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The agriculture sector in India is one of the biggest employers of labour force and grew at

Institutional Sources of Agricultural Finance in India

Non-institutional Sources of Agricultural Finance in India

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