Loans against harvest is opening up new avenues for farm credit as a clutch of private and public sector banks have stepped into this new business. The business is expected to be worth Rs 1,500 crore this year and reach
Rs 1,00,000 crore soon. The business model is based on providing advance loans against crop deposited at warehouses, before the produce is actually sold. Several private lenders, including Development Credit Bank, HDFC Bank, IndusInd Bank and Kotak Mahindra Bank are now offering farmers up to 75% of the market value of the produce as loans against the warehouse quality slip. State Bank of India and its associates, IDBI Bank, UBI and Syndicate Bank are also in the business.
Talking about this development, Anil Choudhary, CMD, National Bulk Handling Corporation (NBHC), said, ?Post-harvest liquidity against produce has been a major concern over the years and has been a big reason why farmers realise only about 30-35% of the value of their produce. The rest is shared by a long and inefficient supply chain.? Lending to agriculture is a priority-sector obligation for banks in India, but a substantial portion of that happens during the pre-harvest season.
Post-harvest, the only option farmers have to get cash for their produce is selling it in the nearest mandi immediately after harvest. Choudhary said, the warehousing industry ought to be treated as a preferred economic activity, like infrastructure. ?The government needs to encourage the private sector to participate in a big way to lend momentum to the sector.?
This, he felt, would help clear banks? apprehension about the quality of warehouse management and do away with concerns over stored grain.
NBHC is currently managing 1 million metric tonne of agro-commodities, with another 1 million metric tonne being managed with collateral arrangements by 12 banks.