Indian farmers giving priority to payment of loans: Kotak Mahindra Bank official

Indian farmers have begun to prioritize loan payments even as there is some degree of realization among them that maintaining a good credit score is key to obtaining financing easily, said Manish Kothari, President and Head of Commercial Banking, Kotak Mahindra Bank Ltd.

“Because of the credit scores, people (farmers) would like to have more discipline in terms of ensuring that repayments happen,” he said. Business line in online interaction.

People in rural areas understand that credit scores are available “on the fly” and they understand that scores must be good. “Farmers are beginning to prioritize their financing payments that they would otherwise take for discretionary spending,” he said.

Covid helps digital payments

Additionally, Covid has helped in terms of driving digital payments a little bit more. Kothari said digital convenience improves collection efficiency and is enabled by internet penetration in rural areas.

He said good monsoons over the past three to four years and farm produce prices governing MSP levels have also contributed to farmers paying back loans promptly. “Both of these count. In general, a lot of development is happening in rural areas,” said an official at Kotak Mahindra Bank.

Over the past six to eight months, the collection efficiency has been very good, especially in the tractor financing business. “In fact, it is better than before Covid, which means that the overall income of rural households looks better,” he said.

demand for tractors

Kothari said the 2022-23 fiscal year was good with the demand for tractors increasing by 11-12 percent, especially since the massive intensive production of various crops came to a halt.

In addition, now more than one person in the family earns. From a rural perspective, we have seen good floatation in the tractors and collection efficiency looks good.”

However, the growth in demand for tractors may not be the same as the previous fiscal budget. “What we’re observing from the business is that demand should be less, probably more towards the long-term ten-year average, which is about 5-6 percent,” the bank official said.

Agricultural Infrastructure Fund

On the impact of the Agricultural Infrastructure Fund, he said that a lot of spending is done in infrastructure and a large part of the funding goes either to cold storage facilities or warehouses. “We at Kotak Mahindra Bank have been giving good lending for the past 18 months under the Agricultural Infrastructure Fund (AIF) scheme, which has been guaranteed by the government. However, relatively small businesses are making investments under the scheme because the amount guaranteed is limited to ₹ 2 crore,” Kothari said.

With big players like Big Basket and Amazon Fresh entering the agricultural value chain, the retail sector will become more structured. In addition, many new-age agricultural technology companies are now entering the market and widely contributing to the growth of the agricultural ecosystem, he said. “We could see rapid development in the field trying to fix the unregulated value chain and make the market a little bit more regulated. We think agricultural infrastructure will be an area that will continue to see resilience just because of the impact of AIF and the growth of new-age startups,” Kothari said.