Agricultural lending concepts ST

1
Agricultural lending concepts ST LT Loans for
Agriculture

• Sushrut V. Sardesai
• DGM / MoF
• CAB, RBI, Pune

2
(No Transcript)
3
Classification of Loans

• Based on purpose
• Production credit
• Marketing loans
• Consumption loans
• Investment credit
• Based on tenure
• Short term
• Medium term
• Long term

4
Classification of Loans

• Based on security
• Secured loans
• Primary security
• Collateral security
• Mortgage
• Hypothecation
• Third party guarantee
• Unsecured loans

5
Classification of Loans

• Based on approach
• Individual approach
• Area approach
• DIR loans

6
Agricultural Costs

• Recurring
• Investment specific

7
Crop Loan System

• Cost of cultivation
• Eligibility not to depend on ownership but on
  tilling of land
• Loan to be secured by hypothecation of crop
• Disbursement recovery of loan based on crop
  production schedule
• Quantum of loan based on crop variety, season and
  irrigation status
• Recovery linked with marketing

8
Crop Loan System contd .

• Cost of cultivation
• Scale of Finance
• DLTC
• DCC/BLBC

9
Tools of ST Financing

• KCC
• SCC
• GCC
• SB-cum-OD
• SHG
• JLG
• Farmers Club

10
Causes of poor repaying capacity

• Small land holdings
• Low productivity
• Low / fluctuating prices
• High family expenditure / diversion of funds for
  unproductive purposes
• Lack of adoption of improved technology and
  modern package of practices
• Poor management of farm resources

11
Risk factors in Agriculture

• Production risk
• Technological risk
• Ignorance / illiteracy related risk
• Weather uncertainty risk
• Price uncertainty risk
• Farmers health related risk

12
Risk mitigation measure

• Crop insurance
• Asset insurance
• Health / Life insurance
• Tie-ups for recovery
• Marketing loans / Warehouse receipt finance
• Formation of Farmers Clubs
• JLGs / SHGs

13
Classification based on PSL

• Direct Agriculture
• Loans to individual farmers, groups of individual
  farmers including SHGs / JLGs provided banks
  maintain disaggregated data on such loans
  engaged in Agri. and Allied Activities, viz.,
  dairy, fishery, animal husbandry, poultry,
  bee-keeping and sericulture (up to cocoon stage)
• Indirect Agriculture
• Loans to corporates, partnership firms and
  institutions engaged in Agriculture and Allied
  Activities dairy, fishery, animal husbandry,
  poultry, bee-keeping and sericulture (up to
  cocoon stage)

14
Direct Agriculture

• Short-term loans to farmers for raising crops
• MT LT loans for agri. and allied activities
• Purchase of agri. Impl. and machinery
• Irrigation and other dev. activities
• Allied activities
• Pre-harvest and post-harvest activities,
  (viz., spraying, weeding, harvesting,
  sorting, grading and transporting of their own
  farm produce)
• Loans up to 25 lakh against pledge /
  hypothecation of agri. produce (including
  warehouse receipts) for a period not exceeding 12
  months.

15
Direct Agriculture contd.

• Loans to SF/MF for purchase of land for
  agricultural purposes
• Loans to distressed farmers indebted to
  non-institutional lenders
• Loans to PACS, FSS and LAMPS for on lending to
  farmers for agri. allied activities.
• Loans to farmers under KCC Scheme.
• Export credit to farmers for exporting their own
  farm produce

16
Indirect Agriculture

• Short-term loans for raising crops
• MT LT loans for agri. and allied activities
• Purchase of agri. Impl. and machinery
• Irrigation and other dev. activities
• Allied activities
• Pre-harvest and post-harvest activities,
  (viz., spraying, weeding, harvesting,
  sorting, grading and transporting of their own
  farm produce)
• Loans up to 25 lakh against pledge /
  hypothecation of agri. produce (including
  warehouse receipts) for a period not exceeding 12
  months

17
Indirect Agriculture contd.

• Export credit to corporates, partnership firms
  and institutions for exporting their own farm
  produce
• Loans upto Rs. 5 crore to Producer Companies set
  up exclusively by only SF/MF under Part IXA of
  Companies Act, 1956 for agri. and allied
  activities.
• Bank loans to PACS, FSS and LAMPS other than
  those covered under direct Agriculture

18
Other indirect agriculture loans

• Loans up to 5 crore to coop. societies of farmers
  for disposing of the produce of members.
• Loans to Custom Service Units managed by
  individuals, institutions or organisations and
  undertake farm work for farmers on contract basis
  
• Loans for construction and running of storage
  facilities (warehouse, market yards, godowns and
  silos), including cold storage units designed to
  store agriculture produce/products

19
Other indirect agriculture loans contd.

• Loans to MFIs for on-lending to farmers for
  agricultural and allied activities subject to
  conditions
• Loans sanctioned to NGOs, which are SHG Promoting
  Institutions, for on-lending to members of SHGs
  under SHG-Bank Linkage Programme for agricultural
  and allied activities. ROI /lt Base Rate 8
• Loans sanctioned to RRBs for on-lending to
  agriculture and allied activities

20
Potential Activities

• Fruits and Vegetables
• Floriculture
• Medicinal and Aromatic Plants
• Minor Irrigation Schemes - development
  management
• Livestock based Schemes - Dairy, Poultry,
  Fisheries, etc.
• Land development activities - soil water
  conservation
• Mechanisation of Agriculture
• Organic Farming
• Bio-fuel and TBO seeds
• Agro-processing
• Seed and Planting material production
• Agri-clinic and Agri-Business Centres
• Post harvest and Marketing Infrastructure
  Development, etc.

21

• Thank You