Call for innovative mechanisms to bolster credit flow to agri sector

Mumbai, Mar 14 (UNI) Credit flow to the agricultural sector constitutes a major problem with only about 20 per cent of rural households having access to formal credit, stated a Yes Bank presentation at the 6th Annual Baramati Initiative on ICT&Development-''The Potential of e-Agriculture'' held over the weekend at Baramati, near Pune in Maharashtra.

The presentation by Counry Head-Transaction Banking Group of Yes Bank Suresh Sethi stated that the value of credit against agricultural commodities stands at only around Rs 20,000 crore.

Enumerating the characteristics of the rural credit market such as opaque pricing and markets and non-negotiability of warehouse receipts, among others, Mr Sethi called for development of comprehensive models that offer cover at various stages of crop sowing, crop nutrition, irrigation, harvest and market protection.

''Insurance is presently limited to a few products such as crop insurance and weather insurance,'' he said, adding that banks and other financial institutions would require a better understanding of the commodities business and expected profitability.

''They also need to understand better risk management by focusing on specific risks and their specific mitigants besides cultivating skills to measure, monitor and control various other risks,'' he added.

Emphasising on the vital role that technology can play in ensuring a better flow of credit to farmers and the agricultural sector in general, Sethi said that information communication technologies (ICT) will help enhance better accessibility, execution capability and monitoring of credit.

Deeper penetration and farther reach of financial institutions in rural India is a must, said Sethi adding that ICT adoption will also enable adoption of effective and efficient systems and procedures, especially in financial settlements where e-payments can essay a vital role.

Similarly, monitoring of credit flow and its end-use can be done best by use of technology, he said record-keeping enables effective monitoring and follow-up of rural transactions and credit programmes.

Sethi presented two mechanisms namely the Infothela project and the Sampoorna Krishaksewa Kendra. The Infothela project, an initiative of IIT, Kanpur, has ten carts plying the villages around the campus, providing information to farmers on the latest prices, arrivals and market trends through the Internet.

The carts are equipped with an electronic trading and financial system and facilitates biometric identification-based dematerialising of warehouse receipts, besides being less expensive, easy-to-use, cheap and more secure.

Speaking on cost-savings, Sethi said that since manpower can be outsourced to micro-finance corporations for identification and cash disbursals, there will be enormous savings such as savings on the costs of ATMs, etc.

Similarly, the Sampoorna Krishaksewa Kendra (SKK) is a farmer's metamarket' or an integrated one-stop shop catering to all services required by farmers wherein the nodal agency is constituted of trained agricultural graduates. He said that this was a classic example of public-private partnership and provides services such as agri-inputs, farm finance, storage facilities, advice to farmers on cropping practices, information on market trends, prices and off-take of various commodities in the markets and hire or purchase of farm equipments.

''All these can be effectively integrated and transformed into a highly-functional and effective model through use of ICT,'' Mr. Sethi pointed out. Listing some of the services that ICT can facilitate, Sethi said that these included the creation of a data repository for creation of credit history and credit profile, cropping patterns, buying behaviour and market analysis.

Besides, financial services such as payment and collection, credit evaluation and disbursal of funds and retail banking can be done efficiently through ICT usage, Mr. Sethi said.

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