Page 38 - Banking Finance December 2019

ARTICLE

chain. Agriculture entails a sequence of interlinked activities participants along the value chain through mobile phones
- transaction- in a chain that starts from the supply of seeds has improved economic integration and cooperation. Mobile
and fertilizers and finish in the mouth of consumers. These phones connect the financial partners along a value chain
are financial instruments specially designed to strengthen through telecommunications and cashless transactions. The
these links between the actors along the value chain. goal is to facilitate financing, marketing of products and
information transactions among the supply chain partners.
The Government has understood that appropriate agri-
business culture in the country can give rise to an all- 6th way is inclusive finance (micro finance): This
inclusive economic growth. To boost agri-business the instrument is slightly more sophisticated but still part of
government has been attempting to ensure robust modern informal financial sector. It has become so popular that
infrastructure in the food processing sector along the entire specialized banks within financial institution are also
value/supply chain of food processing through its scheme providing small loans and saving services, while accepting a
Pradhan Mantri Kisan Sampada Yojna (PMKSY). wide variety of assets as collateral.

The real challenge is to expand credit flow for meeting the 7th way is Traditional finance: Under this method we cover
agri-value chain credit demand supply gap is grey area for loans leasing and equity finance. It is used to encompass the
agriculture credit. The Finance for agricultural value chains most common form of finance for larger sums of money over
can be more indirect and is developed within the interlinked longer period of time.
relations between suppliers, buyers, producers and banks.
The focus of financing is on the business transaction 8th way is infrastructure finance: A well-functioning
between two or more participants of the chain, rather than agricultural sector needs appropriate infrastructure such as:
direct financing of the farmer or entrepreneur. road networks to link isolated rural areas to markets;
irrigation technology to reduce farmers' dependence on
These transactions are financed to reduce costs and risk, rainfall; storage facilities to protect harvests from weather
increase efficiency and improve the credit profile of the and pests; telecommunications to ensure efficient trading,
actors in the chain by lowering lending risks. It is a holistic water supply and energy; among others.
approach to financing the agriculture system. The different
actors in the chain can be financed with different However, rural infrastructure is underfinanced all over the
instruments and financial service providers. In developing world. Large-scale infrastructure, such as roads, is
countries, informal financing is typically seen at the particularly in need of investment. Traditionally large-scale
producers' end, while more sophisticated financing infrastructure was largely funded by the public sector.
instruments are used at the other end of the chain. However, governments have increasingly been
experimenting with different funding options to finance
The systematized exchange of information among
infrastructure. This is also grey area for finance.
9th way Estate Purchase Loans Purchase of estate,
growing traditional plantation crops viz. Coffee, Tea,
Rubber, Cardamom, Cashew, Pepper, Coconut & other
perennial Orchard crops.

10th way (As per Delegated Authority) Loans against Gold
/ Silver Jewellery for agriculture upto Rs. 2000 lac (under
priority) and Rs. 1000 lac (non-priority), Kisan All Purpose
Term Loan upto Rs. 2000 lacs, Kisan Tatkal Scheme upto
Rs.0.50 lacs Scheme for purchase of Renewable energy
Equipment, Purchase of land for agricultural purpose upto
Rs.10.00 lacs, Issuance of RATM (Rupay ATM) enabled KCC
to all eligible non defaulting farmer.

38 | 2019 | DECEMBER | BANKING FINANCE