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Definition: Agricultural Credit
Agricultural Credit is defined as a type of financing used to provide funding for agricultural producers. This may be in the form of letters of credit, loans or banker’s acceptance documents. This is generally used to provide investment from outside resources to the farming sector.
Purpose based lending: The funds may be used according to the farmer’s planting, harvesting and marketing cycles for purchasing farm machinery, payment of labor wages, or for acquiring more land for agricultural purpose, development of irrigation facilities, etc.
Repayment based lending: It may be short term as well as long term depending upon the purpose of the credit.
Financial back-up based lending: It may be taken as a personal loan or against farm land as collateral.