How Banks Can Reduce Bad Agriculture Loans By Investing In Farmers
Reserve Bank of India found that agriculture Non-Performing Assets (NPAs) increased by 23% from Rs 48,800 crore in 2016 to Rs 60,200 crore in 2017. While agriculture accounts for 8.3% of the total banking sector NPA, an alarming trend has emerged as bad farm loans increased by 142.74% from Rs 24,800 crore in 2012. Banks need to radically rethink farm credit, if they hope to tackle this issue.
Banks can now add to agricultural loans a new feature — FarmGyaan. Investing just Rs 60 for every agricultural loan, banks will actually be directly investing in farm production through FarmGyaan — FarmGuide’s IVRS-enabled information and communication technology (ICT) service capable of 10,000 concurrent customised advisory calls per second in all Indian languages.
With FarmGyaan, banks will be able to provide loanee farmers with essential information services for an entire farming season. Even the World Bank in “Enabling The Business of Agriculture Report, 2017” observed that ICT-enabled services can improve markets access and production levels leading to an increase in small farmers’ income. It found that Indian farmers using a mobile information service on market prices have benefited from an average increase of 5 to 15% in income.
With FarmGyaan, banks can increase credit coverage and alert farmers of outstanding payments. As farmers’ income increases, financial institutions can expect agriculture NPA to reduce. FarmGyaan also ensures banks monitor how farmers are using crop-specific loans via the IVRS responses of loanees. This will help identify potential defaulters.
Through FarmGyaan, banks can achieve better financial inclusion as agricultural credit disbursal becomes transparent and measureable.
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