Dairy Farming Loan in India: Benefits, Banks, Interest Rate, Documents, and NABARD

The dairy business provides a source of daily income with relatively low risk. Most dairy farmers in India raise animals on a small scale using traditional methods. However, the productivity of these farmers can be increased if they scientifically conduct their business. The dairy farm business has huge potential in India as we are blessed with the highest milk production and consumption worldwide.

For a dairy farm business, you will most likely incur expenses related to raw material procurement, dairy production process, dairy product processing, storage of dairy products, packaging, warehousing, etc., and help in the production of milk products.

Dairy farming loan in India

What is a dairy farm business loan?

Farmers, individuals, businesses, and other company owners commonly use farm loans to finance their dairy enterprises. Dairy industry loans can be used for various things, including the construction of farms, the purchase of dairy animals, the construction of milking parlors and storage sheds, the purchase of dairy products, the acquisition of farm machinery, the chaff cutter, and more.

The Government of India has done a wonderful job making it easy for dairy farmers to get loans under Mudra Loans. Under the NABARD program, individuals, first-time entrepreneurs, farmers, and dairy societies can apply for government loans for dairy production. The main purpose of a dairy loan is to help you financially in opening a new dairy business or expanding your existing business.

Purpose of availing of dairy farm loan

Setting up a new dairy farm unit or expanding an existing dairy farm unit
Purchasing of animals for small dairy units
For rearing of young calves and crossbreeding of mulch cows and buffaloes
To purchase dairy machineries such as bulk milk chilling units, automatic milk collection, and dispersal systems, milk vans
To grow cattle fodder and meet other capital needs for the smooth functioning of the farm
Construction, extension, or renovation of cattle sheds
Cold storage services
Dairy marketing outlets
Purchase of dairy dispensing equipment, chaff cutters, etc.
Transportation services for dairy products
Distribution of products
Establishment of manufacturing units
Establishment of new farms or expansion of established dairy farms
Purchase of cattle for small dairy farm units
Construction and maintenance of shelters for farm animals (cows, buffaloes, etc.)
Investment in cold storage facilities and marketing services
Procurement of chaff cutters, dairy dispensing equipment, and other transportation services

Documents required for dairy farming loans

Identity proof like PAN cards, Aadhaar cards, Voter ID, Driving licenses, etc.
Address proof like Utility bills, Ration cards, Aadhar cards, etc.
Salary slips for the last 6 months
Passport size photographs
Proof of registration of dairy business
Property deeds

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Eligibility criteria for dairy farm business loans

A business loan is a working capital term loan that can be availed by agricultural laborers, farmers, SHGs, registered partnership firms, and cooperative dairy societies.
The amount awarded to the applicants may be limited to Rs. 100,000 for the hypothecation of livestock. However, the loan amount offered to customers may exceed Rs. 100,000 for hypothecation of livestock, mortgage of land, declaration under the Agricultural Credit Act, collateral security of substantial value, or third-party assurance.
The profit margin is nil for loans up to Rs. 100,000, and loans exceeding Rs. 100,000 provide a profit margin of 15% to 25%. Interest rates will vary based on the lender and the loan’s structure. The repayment period is between five and six years, and most lenders offer a moratorium period of two to three months.
Minimum 18 years and maximum 70 years.
Individuals, entrepreneurs’ business owners, and farmers previously engaged in dairy activities and serving the dairy sector.
NGOs, Self Help Groups (SHGs), Joint Liability Groups (JLGs), Milk Unions, Cooperative Societies, and Milk Federations are eligible.
Applicants who have no previous default with any financial institutions.

Features and benefits of getting a dairy farm loan

You can get this type of loan to modernize the infrastructure of the dairy farm. Milk houses, automatic milk collectors, dispersal systems, etc., are all part of the infrastructure for which the loan amount can help modernization.
You can apply for a dairy business loan online and upload the necessary documents.
The application process for a dairy farm loan is very fast. Paperwork is minimal; all you have to do is fill out the form and submit it with the necessary documents.
One of the advantages of availing of this loan is that you can enjoy a longer repayment period. The repayment period offered can be between 3 years to 7 years. The loan amount you can avail of can be 75% to 85% of the total investment of your dairy farm. The interest rate is very modest.
Many big and reputed banks provide dairy farm business loans.

How can I repay the dairy farming loan?

You can repay your loan in different ways. The easiest method is to pay through EMIs. Apart from being simple, it is hassle-free, and we are all familiar with this method. You can also opt for a loan guarantee if you make fast profits in your dairy business. This method pays off your loan amount in one fell swoop whenever you want after your first EMI payment. Sometimes, this procedure involves an upfront penalty charge, but some banks don’t charge it.

Another way is to repay your dairy farm loan with a gold loan. All have some gold assets, and if you face challenges in paying off your dairy debt, you can use gold jewelry to pay off the debt. This way, you will neither have to sell your gold nor face any penalty from the bank for late payment. Getting a gold loan is no longer a big challenge today, and you may find some banks with incredibly low interest rates. Later, once you strengthen your dairy farm business, you can repay the gold loan and bring your gold back home.

How to apply for a dairy farming business loan?

If you fall under the eligibility criteria mentioned above, it is time to apply for your daily farm loan. The best option to apply for a dairy farm business loan is to visit the nearest bank branch of your location. You can personally meet the bank representative to get all the important loan-related advice and details. In addition, they can help you understand the loan requirements and eligibility. Loan for dairy farming offers loan repayment options etc.

Take your time to understand everything. You can apply for a milk-dairy project loan from there. It won’t be any more difficult than filling out some simple forms. You can apply for these loans online. Of course, the online method is much faster, and you can get in-depth information about the loan on various bank websites and understand everything at your own pace. Even if you fail to understand a point or two, you can easily clear your doubts by calling the bank representatives. These representatives are available 24 x 7.

Top banks offering dairy farm business loan

SBI
IDBI
Central Bank of India
Federal Bank
Punjab National Bank
NABARD

Bank of Baroda loan for dairy farming

Dairy farm producers have access to financial resources through the Bank of Baroda. The Mini Dairy Units Financing Scheme aims to help farmers set up small dairy units with 2 to 10 milch animals. Interested farmers can apply online and offline for the loan.

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Key specifications

Loan Amount – Minimum Rs. 60,000 – Maximum Rs. 6 Lakhs
Repayment Period – Maximum 5 years with three months moratorium period
Offered to the following entities – Farmers, Individuals, Members of NGOs/Self Help Groups (SHGs), and Joint Liability Groups (JLGs).
Margin – 10%
Interest rate – As per business requirements
Unit size – Minimum 2 – 10 milch animals
Eligibility – All persons engaged in agriculture and allied activities, including small and marginal farmers and agricultural laborers.

Lendingkart dairy business loan

Loans for modern-day dairy needs: We provide loans to modernize the creation of infrastructure. Milk houses, automatic milk collection and dispensing systems, transport vehicles, and bulk milk chilling units come under dairy loans.
Zero Processing Charges: There are no application charges for any of the loans we provide and absolutely no hidden costs associated with the loans.
Hassle-free application process: The application process is as easy as it gets. You only need a few filed documents, and most of the process is online.
Fast loan processing: The application process follows simple steps and minimal paperwork. The process includes application submission, document verification, and disbursement of funds. It results in faster loan processing so you can quickly improve and meet your dairy farm needs.
Better and longer repayment period: Repayment of secured loans comes with a repayment period of at least 3 years and provides a repayment period of up to 7 years for certain loans.
Loan amount of 75 to 85 percent of the dairy project cost: The loan that will be taken will cover 75 to 85 percent of your investment in the dairy farm.
Reasonable interest rates: Interest rates for individuals and farmers range from 2.45% to 4%, and for non-individuals, from 2.8% to 6%.

SBI loan for dairy farming

SBI has two bank loan schemes for dairy-related agricultural projects. The first one – SBI Scheme for Dairy Societies – aims to provide finance for building infrastructures such as the construction of milk houses or society offices, purchase of automatic milk collection systems, transport vehicles, and bulk chilling units; and others called SBI Dairy Plus Agriculture Loan Scheme to provide financing to milk producing members of AMUL Pattern Societies which have been recognized as profitable private milk dairies in the last two years.

SBI agricultural loan scheme for finance of dairy societies

The objective of the SBI scheme for dairy societies is to provide finance for building infrastructures such as the construction of a “milk house or society office,” purchase of an “Automatic milk collection system,” transport vehicles, and bulk chilling unit.

Loan eligibility for dairy societies

The society should have ‘A’ Grade Milk Societies – Registered and affiliated with the district milk union, no adverse comment in the audit report for the last 2 years, supply of 1000 liters per day to the milk union, audit of a balance sheet for last 2 years, Income, profit before tax for last two years, borrowing powers as per society’s bylaws.

The maximum loan limit for dairy societies is 4 times the average profit of the last 2 years maximum of Rs.10.00 lakhs. Milkhouse or society office Rs.2 lakh, automatic milk collection system Rs. 1 lakh, milk transport Rs.3 lakh, chilling unit Rs.4 lakhs.

Margin loan for dairy societies – Margin money will be 15% of the total loan amount.

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SBI loan scheme for financing dairy farm units (dairy plus)

The SBI dairy plus agriculture loan scheme, which provides financing to milk-producing members of AMUL Pattern Societies, has profited in the last two years.

Purpose – Construction of dairy shed purchase of quality milking animals, milking machine, chaff cutter, or any other equipment required.
Limit – Maximum term loan limit of Rs. 5 lakh. 2500 per animal per year, working capital may be sanctioned. Minimum DSCR: 1.75.
Margin – Loans up to Rs. 50,000: None. Loan amount above Rs. 50,000 and up to Rs. 5 lakh: 10%

How to get a dairy farm loan online?

Dairy farm loans are available from several lenders in India. You can apply for a dairy farm loan on the lender’s official website which provides this type of credit. The bank will check the application, and if it is valid, it will approve your loan application and deposit the requested loan amount into your bank account. Dairy farm loan application is also available offline. You must bring the necessary paperwork to the bank location offering dairy farm loans. A bank executive will assist you in applying for a personal loan.

NABARD loan for dairy farming

The dairy farming business is a largely unorganized sector in India and a major source of livelihood in rural areas. However, dairy farming is a big business in India, and milk production is increasing yearly. The NABARD subsidy for dairy farming was introduced to strengthen dairy farming in India.

Objectives of the loan include:

To promote the establishment of modern dairy farms for the production of pure milk
To encourage rearing of heifer calf, thereby preserving good breeding stock
To bring changes in the unorganized sector so that primary processing of milk can be done at the village level
Creating self-employment and providing infrastructure for the predominantly unorganized sector

The process to get a NABARD loan for dairy farming

Determine any dairy farming-related business you will start.
Register your company or any other suitable corporate or non-profit organization.
Prepare a detailed project report or business strategy for a dairy farm, and apply for a loan from the bank.
Submit a bank loan application to any commercial bank, regional rural bank, state cooperative agriculture and rural development bank, or other eligible institutions for NABARD refinancing.
After approval of the bank loan, the promoter should implement the concept with his own money and bank loan.
The bank has the final decision on loan approval, interest rate, tenure, and collateral requirements. Therefore, after disbursement of the first loan tranche, the bank should apply to NABARD for approval and release of the NABARD dairy farming subsidy.
The subsidy will be released to the bank by NABARD. They will deposit the subsidy in the “Subsidy Reserve” account.
On satisfactory service of the loan liability by the promoter, the subsidy amount in the subsidy reserve fund account will be adjusted against the last few repayments of the bank loan.

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IDBI loan for dairy farming

IDBI Bank offers a wide range of product accounts loans for retail and MSME customers or agricultural loans to farmers. Credit to individuals and groups of farmers for purchase of high-yielding milch animals (cattle: indigenous breeds like Gur, Tharparkar, etc. and foreign breeds like Jersey, Holstein Friesian, etc., and in case of buffaloes: Mehsana, Jafarabadi, etc.), construction of cattle sheds, purchase of milking equipment, chaff cutters, etc., and expenses incurred for transportation of animals where animals are not procured locally.

Individuals and groups of farmers have experience in dairy farming and are actively engaged in such activity.

Exposure limit

Minimum Rs. 20,000
Maximum Rs. 10 Lakhs

Central Bank of India loan for dairy farming

Dairy schemes offered by the Central Bank of India to Farmers and Farmers Groups, Individuals, Companies, Societies, Firms, NGOs, etc., can be sourced.

Interest rate

Up to Rs. 3,00,000 – 7.80%
Above Rs. 3 Lakhs to up to Rs.10 Lakhs – 9.10%
Above Rs. 10 Lakhs to up to Rs.100 Lakhs – 9.70 %
Above Rs. 100 Lakhs – As per Borrower Rating

Purpose – To offer finance for the establishment of dairy units for milk production

Loan amount

Unit cost excluding Margin Money
Based on the viability of the project and the repaying capacity of the borrowers

Processing fee

Up to Rs.3 Lakhs: Nil
Above Rs.3 Lakhs: at 0.30%

Repayment period – 3 Years to 7 Years

Conclusion

The dairy business is an important source of supplementary income for small/marginal farmers and agricultural laborers. Dairy farming loans can be used for various purposes like purchasing animals related to dairy products, milking machines, shed construction, dairy items, farm equipment, chaff cutters, and many more.

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Dairy Farming Loan in India6 — Image Source

Setting up a new dairy business involves a lot of investment and thought. Therefore, new business ventures need the best loans for a flourishing business.

Dairy Farming Loan in India: Benefits, Banks, Interest Rate, Documents, and NABARD

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