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PRIORITY SECTOR BUSINESS
An Overview AgriCorp 2015 4 November 2015 Mumbai Manoj Rawat Head, Agribusiness Group RBL Bank
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Priority Sector Philosophy
Credit flow to viable, creditworthy and needy sectors that may not get timely & adequate credit Lending directly to beneficiaries, not through routing them through intermediaries Consider PSL as normal business operation for banks Develop innovative structures, products and processes to address Agri and Rural customers Addresses key areas- Food security, Financial Inclusion, Growth and employment.
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Priority Sector Lending Breakup
Sl. No. Segment Targets 1 Total Priority Sector 40% of Adjusted Net Bank Credit (ANBC) 2 Total Agriculture 18% of Adjusted Net Bank Credit (ANBC) Small & Marginal Farmer 7-8 % of Adjusted Net bank Credit 3 Micro Enterprises 7.5% of ANBC to Micro-Enterprises Only smaller units with P&M < Rs. 25 Lakh or Services < Rs.10 lakh qualify 4 Advances to weaker sections 10% of Adjusted Net bank Credit
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Priority Sector Lending
. Agriculture minimum 18% Small & Marginal Farmers 7%- 8% Rural Housing MSME min 7% Social Infra Export credit Renewable Energy Education loan
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Priority Sector Lending
Agriculture Small & Marginal Farm Credit (7%-8% of ANBC) Agri & Agri allied activities MSE Farm Credit 10-11% of ANBC Farmers/corporates / partnership firms/Agroprocessing Education PSL 40 % of ANBC* Housing 18 % of ANBC Export Credit FY only Agriculture ₹. 8,200,000,000,000 ₹. 8,20,000 Crore annual Credit is the most important & critical non-land input in Priority Sector especially Agriculture Renewable Others *Adjusted Net Bank Credit
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GDP versus Credit
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Agriculture and GDP Share of agriculture in GDP is < 14%
The sector’s importance in India’s economic and social fabric goes well beyond this indicator. The share of agribusiness in is bound to go up significantly with the demand for value addition continuously increasing Agriculture only can address the “twin areas of concern” “Food security” & “Financial Inclusion”
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Credit flow to Priority Sector Lending
(Amount in Rs. Lakhs Crore) Priority Sector Lending Agriculture Sector Lending
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Various Customer Segments being addressed
4/25/2017 9 Various Customer Segments being addressed Socio-economic profile Market Approach Crop loan ,- KCC Large farmers, horticulturists/ orchard owners floriculture Pre Harvest Low income Middle Income High Land Development Irrigation Loans Farm Equipment Medium & small farmers with cash crops and large dairies Post Harvest Commodity Finance Small & marginal farmers with non cash crops and cattle / livestock owners Irrigation facilities Agri Infrastructure Post harvest transport Allied Loan Consumption Loans Investment Loans Ratnakar Bank
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Small & Marginal farmers- Focus of PSL
Inclusion of 8% Agri Lending guidelines has created strong challenge in distribution of credit Covering Small & Marginal Serves multi purposes Priority Sector Target Weaker Section Target Financial Inclusion Target 6 crore small and marginal farmer is 6 crores Most vulnerable section of society
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Market approach Pre Harvest Post Harvest Allied Loan
4/25/2017 Market approach Farmer Finance Pre Harvest Land Development Irrigation Loans Farm Equipment Post Harvest Commodity Finance Irrigation facilities Agri Infrastructure Post harvest transport Consumption Loans Allied Loan Investment Loans Ratnakar Bank
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Capture entire supply chain
AGRI VALUE CHAIN RETAIL AGRI COMMODITY BUSINESS CORPORATE AGRI
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Segments of Agribusiness
RETAIL AGRI CORP AGRI & AGRI VALUE CHAIN COMMODITY & PLEDGE FINANCE Crop Loan Poultry Loan Cattle Loan Allied Activity Plantation Crops Land Development Floriculture Horticulture Irrigation facility (Dug Well, Sprinkler, Drip) Tractor Loans Agri Clinics Agri Business Centres PACS Farmers clubs. Retail customers through corporates Dairy Sugarcane Coffee/Tea Fresh produce Food processing Dealers/sellers of Fertilizers Pesticides Seeds Feed Implements Seed Growers Other Inputs Loan Against Pledge of commodities Cold Storages Tie-up with Collateral Managers Tie-ups with Central Warehousing Corporation and State Warehousing Corporations.
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Key Design Principles 1 2 7 3 6 4 5 Scalable & viable business model
Achieve double bottom-line 2 Complete product offerings 7 Staff with grass root knowledge 3 Close proximity & deep understanding of customers 6 Technology as a key enabler Simple & standardized processes 4 5
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Achieve Double Bottom Line
1 2 Socio-economic growth of our customers Sustained Profits from Agri business PSL Targets KEY OBJECTIVES To build a robust agribusiness portfolio which creates value for the farmers, stakeholders and the bank. Create a strong base of agri customer through value added offerings and customer engagement initiatives Capture the banking requirements and cross sell opportunities across the entire Agri-value chains Create sustained revenue stream for the bank
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8 % of ANBC Mandatory Target
Challenges in distribution of credit The number of land holdings in the marginal and small categories have swelled by 56 million and 11 million respectively in last 4 decades The size of the land holdings has implications for investments in agriculture, its productivity, farm mechanization and sustaining farm incomes itself. 8 % of ANBC Mandatory Target
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Challenges in distribution of credit
High cost of credit delivery Vagaries of nature Debt Waiver Natural Calamities Drought Unseasonal Rains Hailstorms Cold Wave Farmer in Distress Populist measures Debt waivers Vitiates Credit Culture Low Productivity Depleting water Level Falling commodity Prices Poor Infra structure
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Corporate Payment Risk
KEY RISKS Risk Elements Diversion of Funds Diversion of Produce Farmer Payment Risk Price Risk Yield Risk Agri Produce Risk Corporate Payment Risk Liquidity Constraints Non payment to Farmer Other Key Risks: Vagaries of Nature Political Risk Market Risk
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Integrating Value chain Entities
Viz. Dairies, Food processing, Fruit & pulp processing, Sugar Mills, Irrigation companies etc. Sells produce to entities Value Chain Entity 3 Month 4 Pays the Balance amount the loan installment with interest Repays Value chain entities provide technical support & Constant monitoring of crop Value chain entity 2 Month Assist farmers in getting the documentation for loan, and support in giving inputs for farm Value chain entity Corporate Risk Sharing Credit Assistance 1 Month 1
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Simple & Efficient Process
TEMPLATE DRIVEN PROCESSES PROCESS CHECKLIST FIELD CHECKS APPRAISAL AND QUALITY CHECK CONTROLS / CHECKS Control through Risk and Operations System Validations End use monitoring Alerts for early warning and probable NPAs. EFFICIENCY Straight through processing – One time data entry Auto printing of all documents from system Online generation of CAMs and appraisal report QC – Quality Check Process SG – Solidarity Group Loan
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CUSTOMER VALUE PROPOSITION
Timely availability of adequate credit to the farmers Longer customer embedment Services offered keeping holistic customer’s needs in mind Convenience to customers Continuous availability of credit crop cycles – 5 years KCC Village level meetings to deepen engagement with customers Help corporate buyback arrangements Cash flow based assessment - credit absorption & servicing capacity Product to meet both short term and long term demands of famers Credit assistance from sowing to marketing /storage Credit Shield to mitigate risks Consumption loans to meet family requirements Simplified documentation, Quick turn around Time Reaching out to customer at their doorstep
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Unlocking the Agribusiness Potential
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Rural & Agribusiness at the centre of Economy
Payment & Remittance Micro Banking Agri Banking Farm Equipment Rural Housing MSME Rural Banking Spectrum
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Rural India Village : 2020 MODEL VILLAGE With modern amenities
Because it will have A wi-fi connectivity across all the houses Best educational facility with school Concrete roads Primary & Secondary Health care with advance eye, dental & maternity care Agriculture production with advanced agriculture techniques giving high yield Online pricing access and monitoring of crop and commodity Village level Aggregation and Market centre Agri-based textile & processing industry Its own water filtration plants providing pure water Its own green energy source like wind mills, solar energy May 20, 2012: Times of India
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A modern day village would look like
Aggregation Centre
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To conclude…. 1 2 i Socio-economic growth of our customers
Also achieve Statutory PSL Targets Regulatory goodwill Sustained Profits from Rural business KEY OBJECTIVES To build a robust agribusiness portfolio which creates value for the farmers, stakeholders and the bank. Create a strong base of agri customer through value added offerings and customer engagement initiatives Capture the banking requirements and cross sell opportunities across the entire Agri-value chains Create sustained revenue stream for the bank i 20% 80% Planning Execution
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Head, Agribusiness Group
Thank You Agriculture only can address the “twin areas of concern” “Food security” & “Financial Inclusion” Manoj Rawat, Head, Agribusiness Group RBL Bank, Mumbai
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