Kotak Mahindra Bank expects the emergence of more specialized and high-tech companies to bring smart, credit-oriented promoters into the agricultural tech space to boost lending to this sector.
The bank sees good traction in terms of cash flow on the e-NAM (National Agricultural Market) platform from less developed states such as Jharkhand, Odisha and Bihar with less advanced APMC market configurations.
BS Sivakumar, chairman and key member of the management team, Kotak Mahindra Bank, said the bank is working hard to obtain information and analyze the profile of participants on e-NAM, and the next step is to develop credit modules, so that loans can be based on the value of transactions made by individuals and businesses.
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Historically, he said, the bank had put in place a specialized agricultural team to overcome the complexities of such a project and assess the agro-tech space for lending.
Last year, the government created an Agricultural Infrastructure Fund under which banks are required to support agricultural entrepreneurs. Among private banks, Kotak is among the largest in terms of sanctions imposed on the agricultural infrastructure fund, and was recently uploaded to the e-NAM platform.
The rural bank’s biggest challenge is that people don’t believe in maintaining a large balance in their bank accounts and prefer to keep cash, Sivakumar said.
That said, the rural segment has switched to digital payment because of its convenience and online collections for the bank have shown a positive trend, he said.
Kotak Bank has an agricultural loan portfolio of around 30,000 crore, focused on small and marginal farmers, traders, dealers, cold storage SMEs, warehouses and processors, large agricultural enterprise segment , loans to NBFCs for micro-loans, tractor financing, vehicle financing and the microfinance segment.
Beyond traditional agriculture
Farmers are interested in advanced activities and the bank focuses on loans for value-added crops such as horticulture, dairy, mushroom growing, floriculture, fruit plantations, poultry and fishing , in addition to working capital for large companies.
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The second wave of Covid had impacted collection in the rural market but for comparison, the rural segment was still not as affected as the urban segment, he said.
“The collections of the microfinance vertical were affected because bank agents could not go out due to travel restrictions. The government later announced a six-month moratorium. So, for the most part, we haven’t seen any major flaws in our books. There has been some impact, but we expect a recovery in the next six months, ”Sivakumar said.