Financial Daily from THE HINDU group of publications
Monday, Jun 05, 2006
Financial Daily from THE HINDU group of publications Monday, Jun 05, 2006 |
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Money & Banking
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Farm credit Agri-Biz & Commodities - Farm credit Industry & Economy - Rural Development Banks aggressive on rural portfolio Archana Venkat
A FILE picture of a scene at a village in Uttar Pradesh. - Rajeev Bhatt
Chennai , June 4
Traditionally short-term loans ranging from Rs 50,000 to Rs 1 lakh have worked in rural areas. But with renewed interest in agriculture, banks see immense opportunity for rural credit. "Rural market is diversifying from its focus on basic agriculture," says Dr S. Elangovan, Deputy General Manager, Priority Credit, Indian Overseas Bank (IOB). Agriculture today covers not only food crops but also commercial crops (cash crops), horticulture, spices, medicinal plants and floriculture. Allied industries like poultry, fisheries and animal breeding come under agriculture. The amount borrowed by small farmers generally ranges from Rs 10,000 to about Rs 3 lakh, while farmer groups can avail of up to Rs 25 lakh. The interest on these loans varies between seven per cent and 13.50 per cent, depending on the loan amount. Most farmers who avail of small loans eventually set up small-scale industries targeting exports or inter-state trade, says Mr T. Valliappan, Executive Director, Vijaya Bank. Poultry and allied areas constitute about 25 per cent of agriculture lending and have grown in scale. "People who used to own a backyard pen, today invest in one lakh chickens," said Mr Elangovan. Bankers say these businesses are spurting due to genuine demand and are confident of loan repayment.
High recovery rate
Rural credit today is popular for its high loan recovery rate. Most banks reported at least 90 per cent recovery on loans for 2005-06. "Collaterised lending is also growing," says Mr V.A. Joseph, Chairman and Managing Director, The South Indian Bank. Banks are reworking their loan products to suit such diversified trade. "We are looking at variants of crop loans that will help a farmer invest in something that could give him a good return," said Mr Valliappan. Options include minor irrigation, farm mechanisation and horticulture. Term loans for crops are also popular. These take into account a crop's entire lifecycle and provides for working capital, harvest capital and some cash even during off-season periods to help the farmer continue with his livelihood. IOB has designed area-specific loans. For example, the West and East Godavari regions have been classified as inland fisheries, Guntur for Poultry, Mercara and regions near Coorg as Coffee plantations. Their loans are customised to help such businesses thrive. The bank has a tie-up with CAMPCO to fund arecanut production in the South Canara region. Many banks have tie-ups with companies like TAFE, Eicher and EID Parry to finance loans for farm implements and sugarcane production. Besides self-help groups, banks are also looking at tie-ups with organised financiers (non-banking financial institutions) to market their loan products.
More Stories on : Farm credit | Farm credit | Rural Development
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