Educational Loan on Agriculture Land: Is it Possible?

In India, higher education abroad is imperative for a successful career, yet an approximate 5.62% inflation in 2023 makes it costly. Abroad education loans are a lifeline, making higher education abroad attainable. There are two types: secured and unsecured loans. Secured loans are preferable due to lower interest rates and higher amounts but require collateral. Previously, agricultural land couldn't be used as collateral due to some state legislation. However, the situation has changed, and banks like the Union Bank of India (UBI) now provide education loans for agricultural land. Let's explore this further and answer the question: "Can I get an education loan against agricultural land?

Features of education loan on agricultural land

As mentioned above, the UBI program offers the opportunity to obtain an education loan for studying agriculture abroad. Now, let's examine some of its enhanced features:

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State-specific agricultural land requirement

India is a country whose 20% of the GDP is contributed by the agriculture sector and almost half the population is in farming or agriculture-related professional roles. Thus it was very difficult for many people earlier to plan for education abroad as they were not able to take education loan against their agricultural lands. Now, there are few public sector banks that are providing loans. But then also there are certain state regulations that can be considered as terms and conditions that need to be fulfilled by you so that the bank can provide you with the loan. 

Three categories have been made considering all the major states that are providing education loans against agricultural land. This will help you to better understand the state-wise rules. 

States prohibiting agricultural land mortgages

There are some states that still do not allow the mortgaging of agricultural land. These states are:

• Punjab
• Rajasthan
• Bihar
• Karnataka

States allowing agricultural land mortgages

• Delhi
• Tamil Nadu
• Kerala
• Andhra Pradesh and Telangana (only need to submit Patta Passbook and Title Deeds)
• Odisha

States Allowing Agricultural Land Mortgages with Restrictions

• Uttar Pradesh and Uttarakhand

The Uttar Pradesh Zamindari Abolition and Land Reform Act 1950, states that education loans are possible on Agricultural lands but they should not belong to Schedule Tribe (ST) and Schedule Caste (SC) individuals. Also in Uttar Pradesh & Uttrakhand, there are restrictions to selling agricultural land if it is larger than 12.5 Acres, hence banks avoid giving loans on such lands.

• Madhya Pradesh

MP Land Revenue Code Section 165 (2a), states that the land owner is eligible to take an education loan on agricultural land only if the land owner owns more than 5 Acres of irrigated land or 10 acres of unirrigated land. For example - if a landowner owns 8 Acres of irrigated land then 3 Acres of land can be used as a mortgage for the education loan.

• Himachal Pradesh

As per Himachal Pradesh Agricultural Credit and Miscellaneous Operations Act 1973, there is no restriction on taking education loan against agricultural land, it's just that the land should not belong to any Schedule Tribe (ST) community individual.

• Haryana

As per the Himachal Pradesh Agricultural Credit and Miscellaneous Operations Act 1973, there are no restrictions to taking education loans on agricultural land but there should not be any existing/pending loans on the agricultural land.

• Gujrat

Bombay Tenancy and Agricultural Land Act 1948, states that written permission is required from the Collector to take a loan on agricultural land. In some cases, permission may not be required in case the land is located in a residential or industrial area. 

• West Bengal

West Bengal Land Reform Act 2002 states that in case you want to use the agricultural land for non-agriculture purposes (education loan in this case) then you have to get written permission from the Collector.

• Jharkhand

As per the Chotanagpur Tenancy Act 1908, education loans on agricultural land can be taken. The only condition is that it should not belong to ST, SC, or Adivasi community individuals.

• Maharashtra

There are 3 laws that govern the mortgaging of agricultural land that are Bombay Tenancy and Agricultural Land Act 1948, the Maharashtra Land Revenue Act, and Code and Fragmentation Act. To summarize all these states that the agricultural land can be used as a mortgage only in case it is not registered under the 7/12 extract.

• North East States

The state laws are different for every state but in summary, all of them state that the agricultural land should not belong to a tribal community individual in case one plans to take an education loan against agricultural land. In Assam, in addition to this, the area in which the land is located should be declared by the government as residential. 

All these rules are state government-defined but the banks have to follow all these rules in order to provide you with an education loan on agricultural land. There are some other terms and conditions with respective banks.

Education loan eligibility on agricultural land

A Few general eligibility criteria that you have to keep in mind while applying for abroad education loan on agricultural land are -

• More than 50% of the income of parents/spouses should come from agriculture and related activities.
• A certificate from Tehsildar that should not be older than 18 months. 
• The credit history has to be good. 
• Must have a minimum of 60% or above in your last education qualification
• Should be family’s agricultural land only with 5-7 ft boundaries

Alternative options for education loan

There are other alternate options that you can go for before going for an education loan on agricultural land. These options are:

• In case you do not have the property (collateral) in the name of a close relative then you can also attach third-party collateral for their education loan, provided the owner agrees to mortgage the property on behalf of the student.
• In case you are not able to arrange any type of collateral then you can go for education loans from some private banks. There are some private banks that can provide you with education loans without any collateral (terms and conditions applied).
• There are many Non-Banking Finance Companies (NBFCs) that can help you get an education loan without any collateral as well.
• Choosing an international lender could also be a viable option for you to get an education loan for your studies abroad.

To summarize all the above-mentioned information, it can be said that education loans are now possible on agricultural lands but we at GyanDhan advise you to keep this as your last choice. In case you are not able to get an education loan with collateral then you can opt for the alternative options that have been mentioned in this blog. Check your loan eligibility here.

Read also:

• Best Banks For Abroad Education Loans in India
• Foreign Education Loan for Abroad Studies:
• Education Loan for Abroad Studies by Indian Government
• Best Banks For Abroad Education Loans in India

Frequently asked questions

Can a farmer take an education loan to study abroad?

Yes, as a farmer you can take an education loan under the Union Bank of India Union Kisan Shiksha Suvidha (UKSS). All you need to do is follow the eligibility criteria which has been discussed in the blog above.

What is the maximum loan amount that I can get by pledging agricultural land as collateral?

You can get up to 30 Lakh as the loan amount for an abroad education loan when you put agricultural land as collateral. 

Are private banks or NBFCs allowed to pledge agricultural land as collateral?

No, private banks and NBFCs do not allow you to pledge agricultural land as collateral. This is only possible with public sector banks like UBI. It is also recommended that if you want to pledge collateral then you should prefer public sector banks over any other type of lender because of the benefits like lower interest rate, higher loan amount and more.