Such financing is engaged to finance commercial agriculture and agro-processing in a commercial scale. The method of financing is term loans which are repayable as bullet repayment, upon the close of a crop cycle.
Commercial agriculture/ farming or agriculture is required for dairy farming, commercial farming of grains i.e., grain, wheat, barley etc., plantation crops, commercial gardening, and fruit farming. The firm loan has many components i.e., operating costs, purchase of procurement of farm machinery, availability of suitable land/ space, technical knowledge of the crops and the experience of the person concerned to be able to execute the farming in a large scale as well as proper marketing tie-ups.
The produce must be capable of being sold at the markets. There is no scope for financing subsistence farming. Adequate infrastructure should be present to ensure marketability of the produce. Owing to the nascent nature of the economy there needs to be involvement of adequate Govt. machinery. Else the chain of organizational processes will not be capable of materializing. The Bank will develop different margin stipulations for financing different components of the farming processes which should not exceed 50% of the costs for equipment purchases and 75% in the case of operational costs. The remaining investment must be borne by the borrower(s). The Bank can provide finance to individuals but will prefer to a cluster/ group of people.
The scale of the finance is to be determined on a case-to-case basis after due assessment of all input costs. In most cases repayment will be through bullet type i.e., single installment after sale of the crop.
