Farm Credit – The Biggest Challenge

It does not give the farmers the benefit of using their crop as the collateral or is linked with the credit worthiness of the farmer, which makes the financial inclusion difficult. No wonder, many people are migrating from farming to other occupations.

The recent out of turn monsoon has offset the agriculture production adding to the woes of the farmers, especially the small farmers. It has further affected the asset quality of the agriculture credit due to the large chunks of crop that have been damaged. This has resulted in selling off the crop at short intervals at mandis and compromising the selling price of the agriculture commodities. Tackling the problem, the government has been requesting banks and NBFCs to ensure the credit allocation to the farmers and indeed perpetuated to increase lending to the cultivators.

Private companies like Sohan Lal Commodity Management (SLCM), a warehousing service provider have invented methods that help farmers avail a loan against their crop through their wholly owned subsidiary Kissandhan. This not only gives the farmers a supplementary source of income, but also provides them with the solution of crop storage till they are ready to sell off the production in the market. This reduces the risk of making losses on the crop sale and allows them to protect their harvest from natural calamities like El Nino. Many banks have been tying up with post harvest agri logistics groups to provide facility to farmers, which is crucial at times like these.
Some of the major banks that have tied up with SLCM to disburse loans include Bank of India, Central Bank of India, State Bank of India, ICICI Bank, Commodities Services Limited, L&T Finance. With proven capabilities, SLCM has even expanded their model of collateral financing to Myanmar as well with partnerships with Yoma Bank, CB Bank and United Amara Bank.

The emphasis on crop loans and warehouse receipt financing should be welcomed as a target of Rs 8 lakh crore has been set for agriculture credit during 2014-15. Under the Interest Subvention Scheme for short term crop loans, the banks are extending loans to farmers at a concessional rate of 7%. The farmers get a further incentive of 3% for timely repayment. The move should benefit the credit worthiness of the sector as well as the farmer in sustaining profit and increasing cultivation through crop loans against warehouse receipts and reducing the risks of bankruptcy.

By gauging the forthcoming requirement of technology to cut down crop wastage in farms & crop protection, SLCM believes that this foresightedness has been a major determinant of having a competitive advantage over other players.

The writer has been working with some top leader in agriculture industry and he has the perfect knowledge and experience to write something about potato storage in Delhi NCR being an Indian.

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