Agricultural finance is termed as a division of rural finance devoted to financing agricultural related activities such as production, input supply, wholesale, distribution, processing & marketing.
Credit needs of the farmers can be determined:
• On the basis of time
• On the basis of purpose
On the basis of time: On the basis of time the credit needs of the farmers can be classified as:
Short-term loans: They are required for the procurement of fertilizers, seeds, feeds, pesticides and fodder of livestock, payment of wages of hired labour, marketing of agricultural produce, litigation & a range of consumption & unproductive purposes. The period for these loans is less than 15 months.
On the basis of purpose the agricultural credit needs of farmers can be classified as:
• Productive needs
• Consumption needs
• Unproductive needs
Productive needs – In Productive needs we can take in all credit requirements which unswervingly affect agricultural productivity. Farmers habitually necessitate loans for consumption too. Between the instant of marketing of agricultural produce & harvesting of subsequent crop there is a long gap of time & most of the farmers do not have adequate income to prolong them through this period. As a result, they have to take loans for meeting their consumption needs.
Sources of Agricultural Finance
• Non-institutional sources
• Institutional sources
The non-institutional sources are:
• Commission agents
The institutional sources:
• Scheduled Commercial Banks
• Regional Rural Banks