Loan Against Agricultural Land

A mortgage loan against farming land is a kind of credit given against land owned by the borrower. Usually, farmers procure this form of a loan. The maximum loan for purchase of agricultural land, offered by financial institutions, is usually equal to the value of the mortgaged land.

This loan against farming land can be used for several purposes such as marriage, medical requirements, cultivation of crops, bearing expenses of cultivating machines, and so on.

If you are considering applying for a loan on agricultural land, you must be well-informed about the eligibility criteria. Below are the details about the same.

• Your age must be between 21 years to 65 years. However, the eligible age varies from lender to lender.

• These loans are available to farmers, dairy proprietors, horticulturists, and any orchard proprietors

• Co-applicant is required if the land is owned by two persons

• The agricultural land offered as collateral should be cultivable and free from legal disputes or encumbrances.

• Some lenders may require a minimum landholding or land value threshold before approving a loan to ensure sufficient collateral; specific acreage criteria can vary by institution and scheme.

• Lenders typically ask for proof of stable income, such as bank statements, income tax returns (ITRs), or agricultural income records, to verify your repayment capacity.

• Having a good credit history (a strong credit score) can improve your chances of approval and may lead to better loan terms. While thresholds vary, a higher score indicates lower risk to lenders.

In order to avoid rejection, you must provide the required documents that are listed below.

• Identity proof (Aadhaar card, Voter Id card, Driving licence)

• Address proof (Aadhaar card, Utility bills, Passport, Ration card)

• PAN card

• Land documents, including tax slips, utility bills, registration papers, etc.

• Copy of land sale agreement

• Bank statement for last six months

• Passport size photographs

You can apply for a loan against agricultural land through online and offline modes. You may also apply for the same by visiting the Bajaj Markets website in order to have a hassle-free experience. 

1. Online Mode

Here are the steps to follow. 

• Step 1: Choose the financial lender and visit its website.

• Step 2:Go to the ‘Loans’ section and choose the ‘Loan Against Property’ option.

• Step 3:Fill in the details in the application form carefully.

• Step 4:Attach the supporting documents and submit them.

• Step 5: Once the form and documents are submitted, your request will be processed, and the financial institution will take further steps to complete the procedure.

2. Offline Mode

Visit the nearest branch of the financial institution from which you want to obtain this loan and apply for the same by filling up the application form. 

Here are the details about different fees and charges for loans against agricultural land. 

• Foreclosure Fee: This fee is applicable when the borrower pre-closes the loan by paying the outstanding amount before the loan term expires. However, this fee varies from lender to lender as some banks impose foreclosure fees while others do not.

• Processing Fee: It is a one-time fee that applies during the sanction of a loan. Each bank has its own processing fee. 

• Penalty for Delayed Payment: It is imposed when the loan EMI is not paid on its repayment date.

• Bouncing Fee: When a cheque submitted for a loan EMI payment bounces, this fee is imposed.

• Stamp Tax: It is implemented in accordance with the current state legislation. It is a one-time charge made at the moment the loan is disbursed.

• Documentation Fee: This charge is applied when the loan is sanctioned.

• Valuation Fee: It is used if the bank considers the borrower's residential, agricultural, or commercial property.

Here are the key advantages of using your agricultural land as collateral for finance:

• Access to high loan amount: Because the land serves as collateral, lenders may sanction a higher loan amount relative to unsecured credit.
  
• Lower interest rate compared to unsecured loans: Since the risk for the lender is mitigated by land collateral, interest rates tend to be more favourable.
  
• Flexibility of usage: Though primarily for farming activities, many lenders allow non‑farming uses such as education, medical treatment, business investment or personal needs.
  
• Longer and flexible tenure: The tenure can be aligned with agricultural cycles, ensuring repayments are timed with harvest or income flows.
  
• No need to sell land: You retain ownership and continue cultivating; the loan gives liquidity without giving up the asset.
  
• Credit history building: Timely repayment builds your credit profile with credit‑bureaus (such as Credit Information Bureau (India) Limited) improving future borrowing potential.

Loans against agricultural land involve unique risks and operational complexities that affect both farmers and lenders. These challenges arise mainly from income uncertainty in agriculture, gaps in land documentation, and the cost of administering rural credit. Here is a closer look at them:

Challenges Faced by Farmers

• Lack of clear land titles: Many small and marginal farmers do not possess legally verified or updated land records, which limits their ability to use land as acceptable collateral.
  
• Irregular income and repayment pressure: Farm income depends on weather conditions, crop yields, pests, and market prices, making repayment schedules difficult to follow consistently.
  
• Complex procedures and paperwork: Loan applications often involve lengthy documentation and multiple verifications, which can be difficult to manage for farmers with limited formal education.
  
• Limited access to formal credit: Farmers in remote areas may have fewer banking touchpoints and lower awareness of institutional loan options and government-backed schemes.
  
• Absence of credit history: Many farmers operate largely in cash and lack formal borrowing records, making it harder to demonstrate creditworthiness.

• High lending risk: Agricultural lending is exposed to factors beyond borrower control, such as droughts, floods, and price volatility, increasing default risk.
  
• Difficulty in credit assessment: Inconsistent income patterns and limited financial records create gaps in evaluating repayment capacity and loan utilisation.
  
• Land as unreliable collateral: Incomplete land records, disputed ownership, and legal restrictions on land recovery reduce the effectiveness of agricultural land as security.
  
• High operational expenses: Reaching geographically dispersed borrowers with smaller loan sizes increases costs related to staffing, travel, and branch operations.
  
• Mismatch of loan structures: Standard loan products may not align with crop cycles and seasonal cash flows, affecting repayment performance and portfolio stability.

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