1. Farm Mechanization

How Tractor Finance is Helping Farmers in India, Know from the Expert

Sugandh Bhatnagar
Sugandh Bhatnagar
Tractor

India has predominantly been an agricultural economy with 58% of the population still depending on agriculture as their main source of livelihood. Given such a huge proportion of the population involved in Agriculture, India is still not able to produce as much as it needs to feed its ever-increasing population. The main reason for that is the poor level of farm mechanization in the country. Indian farmers are still beset with manual labor & high operational costs.  

Role of Tractors in Agriculture 

Tractors are versatile farming equipment and have great commercial usage as well. In addition to the primary uses of tractors that involve   ploughing and sowing, they can be used with other types of equipment, such as harvesters, tillers, hay cutters, thrashers, etc.  These tractors are also ideal for landscaping, farming, pulling heavy implements, construction work & transportation as well. 

Farm mechanization through tractors can prove to be game-changer for the Indian Agricultural Economy. The tractor market in India is one of the largest in the word and contributes Rs 4-5 billion to the Indian GDP with as much as 6-7 lakh tractors being sold every year. This makes tractors primary agriculture equipment.  Even during covid, when all the industries were witnessing negative growth, tractor industry has witnessed a record growth with over 9 Lakh tractor units being sold in 2020-21. 

What is Tractor Finance? 

Tractor Finance or Tractor Loans are loans provided to farmers or businessmen to buy new or pre-owned tractors. Such tractors can be used for agricultural or commercial purposes. 

All being said & stated, there are so many farmers in India that are still not able to afford tractors. This is where tractor finance plays an important role.  Many Private & Government Banks and NBFCs in India offer such tractor loans to individuals for purchasing new or pre-owned tractors at competitive interest rates which start at 10.55% p.a. Processing fee of around 0.5% may also be charged over the loan repayment term with repayment tenure which could last up to 7 years. 

 

Devershi Shukla, a renowned finance professional says tractor finance plays a very vital role as 80% of the farmers in India are small & marginal who cannot afford to buy tractors without loans. Today, out of the total tractors sold every year in India, 70% are financed by private banks & NBFCs, 10% by Government Banks & 20 % in cash (i.e. without any finance).  

Tractor Finance Has Changed a lot in the Last 10 Years 

Devershi says “Tractor finance has changed lot over the last 10 years. Previously, very less finance facilities were available with only few government banks providing loans. Even the farmer’s psychology has changed over the years, earlier the farmer used to be scared because the process to apply for the loans was so complex. Now, there are banks that provide loans by visiting the farmers at their home."  

Top 5 Banks Offering Tractor Loans  

Bank Bank Name 

Rate of Interest 

Loan Amount 

Loan Tenure 

State Bank of India 

9.00% p.a. - 10.25% p.a. 

Up to 100% finance 

Up to 5 years 

ICICI Bank 

13% p.a. to 22% p.a. 

As per the lender’s terms and conditions 

Up to 5 years 

HDFC Bank 

12.57% p.a. to 23.26% p.a.* 

Up to 90% finance 

12 months to 84 months 

Axis Bank 

17.50% p.a. to 20% p.a. 

Up to 90% finance 

Up to 60 months 

Magma Fincorp 

16% p.a. to 20% p.a. 

Up to 90% – 95% finance 

At the discretion of the bank 

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