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1. FARM CREDIT APPRAISAL
TECHNIQUES
Submitted to
Dr A K Gauraha
(Depart. Of Agricultural Economics)
Presented by
Ravi Kumar rathiya
M.sc. (Ag.) Agril. Econ.
AGECON 509
Agricultural Finance and Project Management

2. What is credit appraisal?
Credit Appraisal is the process by which a lender
appraises the technical feasibility, economic
viability and bankability including
creditworthiness of the prospective borrower.

3. IMPORTANCE OF CREDIT
APPRAISAL
1. To take Correct Credit Decision
2. To Decide the Quantum of Credit
3. To Ascertain the Ability to repay
4. To Find out liquidity, Profitability, Solvency of
Concern
5. To judge the viability of project

4. The major Farm Credit Appraisal
Statements are as folllows
 Balance sheet,
 Income statement,
 Statement of cash flow.

5. The major statements and their
purposes are as follows:
Net Worth Statement—Summarizes the property and
fi nancial assets owned, the debts owed, and the net worth
of the business at a point in time.
Net Income Statement—Summarizes the income
generated, the expenses incurred, and the net income
earned by the business during a period of time.
Statement of Cash Flows—Summarizes all the sources
and uses of cash by the business during a period of time.

6. Current assets Amount Liabilities Amount
Cash On hand 10000 Crop loan to be repaid to
institutional agencies 8000
Savings in bank 8000 Account payable 11000
Value of grain
ready for disposal 38500
Livestock
products (eggs,
birds, etc.)
60000 Hand loans 5000
Fruites,
vegetables,
fodder and feed
ready for sale
8000 Money owned to input
suppliers 25000
Value of bonds
and shares to be
realized in the
same year
2000 Annual installments of
MT and LT loans 19000
Sub total 126500 Sub total 68000
BALANCE SHEET OF A HYPOTHETICAL FARM

7. Intermediate
assets
Intermediate Liabilities
Dairy cattle 10000
Livestock loan
(outstanding amount)
8000
Bullocks 9000
Machinery loan
(outstanding amount)
15000
Poultry birds 15000
Unsecured loans
(outstanding amount)
10000
Machinery and
equipment
15000
Tractor 175000
Sub total 224000 Sub total 33000

8. Long term
assets Long Term Liabilities
Land 600000 Tractor loan (outstanding
amount) 120000
Farm buildings 25000 Orchard loan
(outstanding amount) 25000
Unsecured loans
(outstanding amount) 10000
Sub total 625000 Sub total 155000
Total assets 975500 Total of liabilities 256000
Net worth= Total assets – Total Liabilities
719500 = 975500 - 256000

9. Income Statement of a Hypothetical
Farm
Particulars Amount (in Rs.)
1. Receipts
A. Returns from the sale of crop output (Paddy +
pulse)
52000
B. i. Revenue from milk products 5000
ii. Returns from poultry enterprise 12000
Returns from supplementary enterprises 17000
C. Gifts 2000
D. gross cash income 71000
E. Appreciation on the value of assets 3000
F. Gross income 74000

10. II. Expenses In Rs.
Operating expenses or costs
A. Hired human labour 10500
B. Bullock labour 900
C. Machine labour 1500
D. Seeds 1100
E. Feeds 5000
F. Manures and fertilizers 3000
G. Plant protection measure 1550
H. veterinary aid 500
I. irrigation 250
J. Miscellaneous 2000
K. Interest on working capital 2100
Total operating expenses 28400

11. Fixed expenses or costs In Rs.
A. Depreciation 3000
B. Land revenue 200
C. Interest on fixed capital (include interest of Rs. 1500
paid towards term loan)
3200
D. Rental value of owned land 10000
E. Total fixed costs 16400
Total cost=Total operating expenses+ Total fix costs 28400+16400=44800
III. Net income = Gross returns - total cost 74000 – 44800 = 29200

12. Preparation of Cash Flow Statement
Cash flow Statement- It is a summery of cash inflows
and cash outflows of a business organization in a
particular time period, a season or a year.

13. Cash Flow Statement of a Hypothetical
Farm
S
N
o
Particulars 1st Quarter
(June aug)
2nd
Quarter
(Sep-Nov)
3rd
Quarter
(Dec-Feb)
4th
Quarter
(Mar-May)
Total
I Cash receipts (in Rs.)
1 Cash balance (Brought
forward from previous
year)
3000
2 Total operating
sales(Farm and
livestock products)
1350 1400 30200 7800 40750
3 Total capital sales
(milch cattle)
- 5000 - - 5000
4 Non farm income
(Family members
working elsewhere)
2000 1500 2000 3200 8700
5 Borrowings (ST MT and
LT loans from
institutional agencies)
7500 - - - 7500
6 Total 13850 7900 32200 11000 64950

14. II Cash expenses (in Rs.)
1 Operating expenses 8500 6750 6200 5300 26750
2 Capital investment
(Purchase of milch
cattle)
- - 6000 - 6000
3 Family living expenses 2400 2800 3200 3000 11400
4 Payment of previous
years debt
500 - - - 500
5 Payment of ST loans
and instalments on
investment loans
- - 7968 - 7968
Total 11400 9550 23368 8300 52618
III Cash balance (In Rs.) 2450 -1650 8832 2700 12332
 To estimate the total credit needs of the farmer along with time and quantum

15. Thanks