The Co-operative Banks and Long-term loans
Long-term loans are provided for both agriculture and industry by the Cooperative banks. Long-term loan for agricultural operations are provided by separate Cooperative banks called Cooperative Land Development Banks. They were previously called Land Mortgage Banks.
Long-term loans are provided by the Primary Land Development Bank at the Taluk level. All these primary land development banks in a State are connected with State Apex Land Development Banks.
Primary Land Development banks are financed by RBI, NABARD, State government, State Bank of India and other commercial banks by contributing to their share capital and debenture. Even individuals also contribute to the share capital and debenture of Primary Land Development Banks.
Purpose of providing long-term loan for agriculture
The long term loan in agriculture is provided for the following purposes—
- Repayment of old debts.
- Purchase of new land.
- Purchase of agricultural machinery.
- Improving small and minor irrigation projects.
- Soil conservation and Land reclamation.
1. Repayment of Old loan
Any loan taken by the farmer from money lenders or any other creditors at a high rate of interest, can be repaid by borrowing on a long-term basis from the Land Development Bank. The procedure for borrowing will be the same as explained above.
2. Purchase of new land
Long term loans are also given for the purchase of new lands by which a small farmer who is having an uneconomic land holding can convert it into an economic holding so that his income will substantially increase, compared to the expenditure. The new land is mortgaged to the bank until the repayment of the loan. The borrower will be repaying the loan in installments from the agricultural produce raised from the new land.
3. Purchase of Agricultural machinery
For the purchase of agricultural machinery, such as tractors, loans are provided on a long-term basis against the hypothecation of the tractor. That is, the borrower is allowed to use the tractor and repay the loan on installment basis. On the repayment of the loan, the hypothecation of the tractor is lifted and the ownership is restored to the borrower.
4. Improving small and minor irrigation projects
In villages where, minor irrigation projects could be taken up which include drainage of excess water, Land Development Banks provide loans for a group of farmers on their joint liability or it may be given to a Cooperative society which may be Joint Farming Co-operative Societies or Tenant Farming Cooperative Societies or Better Farming Co-operative Societies.
5. Soil conservation and Land reclamation
Landowners who are having lands which are unsuitable for cultivation, due to rocks, boulders and which are uneven or who are experiencing soil erosion will be provided with loans of long-term in nature so that these lands can be made fertile in the course of years and from the produce, the loan could be repaid in installments.
Procedure of long-term loan for agriculture
Generally long-term loans are provided against the security of land and is repayable over a period of 15 or 20 years. The Land is mortgaged by the borrower to the bank and the loan is repaid on installment basis from out of the agricultural produce grown from the land.
On the repayment of the entire loan, the mortgage is lifted and the land is transferred in the name of the borrower. In case of failure of repayment of loan due to natural calamities or failure of crop, there will be rescheduling of the loan by which repayment period will be extended to 25 or 30 years.