Raising Funds   

The main function of raising funds is carried out be the Central or State Land Development Bank which can really deal with the money market of the country effectively and advance loans to primary LDB’s. The sources of funds of State LDB’s are:-

1. Share capital. 
2. Issue of debentures 
3. Loans from NABARD 
4. Reimbursements of subsidies from the Govt. 
5. Other funds.

Issue of debentures is the main source of funds for the LDB’s. Debentures  is a `Bond’ conveying and acknowledging the debt and also containing the provision of promise for payment of interest at stipulated rate and return of the principal amount. The period of debentures varies from 7 to 15 years. As LDB’s require funds of longer duration to advance LT loans to borrowers, the debenture is a convenient instrument of raising funds. Because it guarantees that funds will remain with the Banks for a specified period.

There are three types of debentures

1. Regular debentures 
2. Rural debentures 
3. Special development debentures.

These debentures are mostly purchased by financial institutions like LIC, Commercial Banks, Co-op. Banks, NABARD, and State Govts. As there is limited response from the public. The State Govt. give incentive subsidies for many development activities by individual farmer including purchase of tractor. The amounts of subsidies are reimbursed to the LDB’s.

Interest rate

The rates of interest for LT Loans are generally low and within the paying capacity of farmers. They are around 11 to 12%.

Loan Procedure

The Branch offices receive applications from the prospective borrower. Then Agricultural Finance Officer or Inspector scrutinises these applications, they visit places of the application and ascertain the purpose of borrowing, verify the genuineness of the proposal and it economic viability, repaying ability of the farmers, adequacy of security,etc. After completing those formalities, the loan is granted by the appropriate authority at appropriate level depending upon the delegation of powers by the Banks.