Mumbai, Nov 3: The Agriculture Finance Corporation Ltd (AFC) has initiated talks with ICICI and IDBI to become equity partners. The move forms part of AFC's efforts to restructure itself based on the recommendations of the Indian Institute of Management (Bangalore).AFC's share capital now stands at Rs 10 crore, and according to its managing director, SC Wadhwa, "It is now proposed that the share capital be augmented by an additional Rs 10 crore to Rs 20 crore". Wadhwa added that other entities like the National Bank for Agriculture and Rural Development (Nabard), and Exim Bank had also committed to contribute to AFC's share capital.
Measures suggested by IIM (Bangalore) study group include the recruitment of professional staff with multi-disciplinary skills, retraining of existing staff, increased computerisation and the building up of a database, and a research and development unit. On the strategy front, recommendations include providing consultancy to the central and state governments in agriculture and allied sectors identified as thrust areas in the ninth plan and exploiting business opportunities in watershed and waste land development, food-processing and agri-exports.
Set up in April 1968 at the instance of the Centre and the Reserve Bank by Indian Bank's Association (IBA), AFC's role was to act as a catalyst to enable banks in the financing of agriculture and rural development. With the entry of state-run banks post nationalisation, AFC had to shift focus to consultancy and credit-related studies from the financing of agriculture. AFC's current membership include 16 nationalised banks, 18 old private sector banks and seven foreign-owned.
The last mentioned-ANZ Grindlays Bank, Standard Chartered Bank, HSBC, Bank of America, Citibank, American Express Bank and Banque National De Paris-have now decided that they will contribute no more to the share capital of AFC. Part of the reason for the reluctance by foreign banks is the fact that AFC has not been paying dividends.
In its thirty years of operations, AFC, made small profits in 27 years, and a marginal loss in its three. With the change in its nature of operations, the share of interest income to total income has come down to 15 per cent from 85 per cent. AFC posted a net profit of Rs 4.24 lakh for the fiscal ended 31 March 1999, down from the Rs 7.47 from the preceding fiscal. In recent times, AFC, has managed to prune its staff strength to 150 from around 180 by offering a voluntary retirement scheme.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.