Agricultural Finance

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
• Medium-term
• Long-term 

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:

• Moneylenders
• Relatives
• Traders
• Commission agents
• Landlords

The institutional sources:

• Cooperatives
• Scheduled Commercial Banks
• Regional Rural Banks