Indian farmers have begun prioritising payment of loans even as there is some degree of realisation among them that maintaining a good credit score is the key to getting finances easily, Manish Kothari, President and Head – Commercial Banking, Kotak Mahindra Bank Ltd, has said.

“Due to the credit scores, people (farmers) are wanting to get a little more disciplined in terms of ensuring that the repayments happen,” he told businessline in an online interaction.

People in rural areas realise that credit scores are available “on the fly” and are aware that the scores have to be good. “Farmers have started prioritising payments for their financing which they had taken otherwise for discretionary spending,” he said.

Covid helps digital payments

In addition, Covid has helped in terms of pushing digital payments a little more. The convenience of digital is improving collection efficiency and it is being enabled by Internet penetration in the rural areas, Kothari said. 

Good monsoon over the last 3-4 years and prices of agricultural produce ruling around minimum support price (MSP) levels have also contributed to farmers paying back the loans promptly, he said. “Each of these counts. Overall, a lot of development is happening in the rural areas,” the Kotak Mahindra Bank official said. 

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Over the last 6-8 months the collection efficiency has been quite good, particularly in the tractor financing business. “In fact, it is better than pre-Covid which means that the rural households’ overall income is looking better,” he said.

Demand for tractors

Kothari said the 2022-23 fiscal was a good one with demand for tractors increasing by 11-12 per cent, particularly since the MSP for various crops “held up”. 

“In addition, there is now more than one individual in the family who is earning. From a rural perspective, we have been seeing good buoyancy in tractors, and also the collection efficiencies look good,” he said. 

However, growth in demand for tractors may not be the same as last fiscal. “What we are perusing from the business is that demand should be lower, perhaps more towards the long-term ten-year average, which is around 5-6 per cent,” the bank official said.

Agri Infra Fund

On the impact of the agriculture infrastructure fund, he said a lot of expenditure is taking place in infrastructure and a large portion of the funding is going into either cold storage facilities or warehouses. “We at Kotak Mahindra Bank have lent quite well over the past 18 months under the AIF (Agri Infrastructure Fund Plan), which the government guaranteed. However, relatively small companies are making investments under the scheme because the guaranteed sum is limited up to ₹2 crore,” Kothari said. 

With large players such as Big Basket, Amazon Fresh entering the agri value chain, the retail sector will become more organised. In addition, many new-age agritech businesses are now entering the market and are contributing extensively to the growth of the agro-ecosystem, he said. “We can see rapid development in the space that is trying to fix the unorganised value chain and make the market a little more organised. We believe that agri infrastructure will be a space that will continue to see resilience purely due to the impact of AIF and growth of new-age start-ups,” Kothari said.

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