PERMANENT

Indian Overseas Bank Ref: No. : ADV/514/2010-2011

Central Office Date : 05.02.2011
763, Anna Salai
Chennai - 600002 Issuing Dept: Priority Credit (Agri)

To All Branches / Regional Offices / other Offices

AGRICULTURAL ADVANCES
NEW PRODUCT: BHUMILAKSHMI
SCHEME FOR FINANCING FARMERS FOR PURCHASE OF LAND
FOR AGRICULTURAL PURPOSES

Reference is invited to C.O. Circulars No.ADV/81/2001-02 dated

22.2.2002 and No.ADV/419/2005-06 dated 21.09.2005 issued by Priority
Credit Department (Agri) on the Scheme for financing farmers for
purchase of land for Agricultural purposes. Though the Scheme has
been under implementation since 2002, it has not taken off well. In view
of the feedback and suggestions received from various Regions
and branches, we have now formulated a revised and improved
Scheme for Purchase of Land for Agricultural Purpose, details of
which are given below:

1. NAME OF THE SCHEME : BHUMILAKSHMI

2. CLASSIFICATION : Direct Agriculture

3. OBJECTIVES

• To finance the sharecroppers / tenant farmers to purchase land

to enable them to increase their income
• To bring fallow lands and waste lands under cultivation
• To step up agricultural production and productivity
• To make the small and marginal holdings economically viable

4. ELIGIBILITY

• Small and marginal farmers

• Share croppers / Tenant farmers
• Total land owned by the borrowers including the land to be
purchased under the scheme should not be more than 5 acres
of un irrigated land or 2.50 acres irrigated land
5. PURPOSE
The purpose of the scheme is to provide land to the Small and
Marginal Farmers / Share croppers / Tenant farmers to possess and
cultivate land. Hence it is a pre-condition that the purchased land
should be used for cultivation alone. They can also be financed for
purchase of fallow and waste land for developing them for
cultivation or for using for other allied activities.

6. MODE OF LENDING:
Term Loan repayable in installments

7. QUANTUM OF LOAN
It will depend on the valuation of the land to be purchased and
also the development cost subject to ceiling of Rs. 10.00 lakhs

8. MARGIN:
Up to loan amount of Rs.1 Lac : - NIL
Loan amount exceeding Rs.1 Lac : - minimum 10%

9. SECURITY
The land purchased out of the bank finance and mortgaged in
favour of the bank will form the security for the loan from borrowers.
Branches may temporarily take separate collateral security if
mortgage of the purchased land in favour of the Bank is delayed

10. INTEREST RATE

As per our Bank’s directives on interest rates, the present rates are as
follows:-
Up to Rs. 500000/- : Base Rate + 1.50% (Presently 11.00 %)
Over Rs. 500000/- : Base Rate + 2.50% (Presently 12.00 %)

11. VALUATION
For the purpose of valuation of the land, the price quoted by the
seller may be cross checked either with average of two valuations
obtained from two independent panel valuers or from the local
revenue department.

12. DISCRETIONARY POWERS

The Branch Managers are empowered to sanction loans under the
above scheme up to a limit of Rs. 10.00 lakhs only (maximum) as per
 the revised discretionary powers advised vide CO CSSD Circular
No.ADV/484/2010-11 dated 21.10.2010.

13. REPAYMENT PERIOD

Loan may be repaid within 12 years in half yearly / yearly instalments
including a maximum moratorium period of 24 months. The
moratorium period may be fixed taking into account the gestation
period of the project and cash flow.

14. REPAYING CAPACITY

Loan should be assessed based on cash flow from proposed activity
as well as existing sources of income. The branch should satisfy itself
that the borrower/s would have adequate income surplus to repay
the bank loan with interest. Repayment period may be fixed
accordingly.

15. OTHER POINTS

• When loan is granted for purchase of virgin land/lands requiring
development to make it cultivable, the loan amount can also
include cost of land development within the overall ceiling.

• The farmers may be allowed to purchase land within the village

boundary or in a radius of 3 to 5 kms from the existing land owned
by him, taking care also of the managerial aspects of such
fragmented holdings.

• Wherever land development involves digging of open wells /

drilling of bore wells, the possibility of getting electricity supply on
priority basis may also be examined.

• Whenever farmers are financed for purchase of un irrigated land,

they should be guided to take up such crops or vegetables which
need less water and allied activities like dairy etc.

• Self Help Groups with satisfactory record and who fits into norms of
the schemes may be encouraged to avail the loans for purchase
of land so as to enable them to diversify their activities and to build
up community assets.

• The scheme aims at boosting the production and productivity of

land purchased. The finance provided by the bank should not result
in acquisition of land for investment or speculation.
• Project cost may include, besides cost of land, value of stamp duty,
registration charges for sale / mortgage deed and other land
development expenses.

• In certain States / Regions, State Governments have imposed

restrictions on sale / purchase of agricultural land (e.g., Tribal belt,
SC/ST hill areas etc,). Branches should take note of such instructions.

• The branches should follow other usual banking norms and

safeguards.

With the introduction of the new scheme, the existing scheme for
purchase of land stands withdrawn with immediate effect. Repayment
of existing loans under this scheme should however continue as per
schedule.

(S.N.MISRA)
GENERAL MANAGER