Agricultural Finance | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE B: FUNCTIONS OF BANKS
Agricultural Finance - Descriptive Notes and MCQs Agricultural Finance Agricultural finance refers to financial services provided for the agricultural sector including farmers, agricultural businesses, and rural enterprises. It encompasses short-term, medium-term, and long-term credit requirements to support crop production, farm machinery, irrigation, and risk mitigation. Short-Term Loans Short-term agricultural loans are generally provided for seasonal farming operations such as purchasing seeds, fertilizers, and pesticides. These loans are repayable within 12 to 15 months. Example: If a farmer borrows ₹50,000 at 7% interest for 1 year: Interest = (₹50,000 × 7 × 1) / 100 = ₹3,500 Medium and Long-Term Loans Medium-term loans (3–5 years) and long-term loans (above 5 years) help in acquiring fixed assets like tractors, tube wells, and land development. Illustration: A farmer takes a long-term loan...