The State Bank of India, India's largest bank, is also the country's largest lender to rural sector. Through its YONO Krishi platform, SBI is harnessing the agri-fintech ecosystem to alter the way agricultural loans are granted and renewed. Farmers may now renew their Kisan Credit Card (KCC) loans with four clicks on the app, according to Challa Sreenivasulu Setty, Managing Director, SBI, who oversees the agricultural and rural sectors.
The efforts and future goals are listed below, as the bank aims to grow its agriculture sector business to Rs 3 lakh crore by FY24, up from the current Rs 2.15 lakh crore.
Current scenario of agricultural sector
Across the board, the crops have done well. In FY20-21, demand from both agribusiness and rural regions has been strong. Rural regions were less affected in the initial wave. As a result, the tale of rural consumption and production was compelling. We've observed some impact in rural regions during the second wave. According to preliminary projections, GVA increased by 3.6 percent in FY21, and it is anticipated to increase by 3.5-4 percent in FY22. We saw an increase in infections in Q1 FY 22, but rural demand began to ramp up in June-July. We expect rural areas to fare well this fiscal as well, thanks to a healthy monsoon and adequate rainfall distribution.
KCC loans
The most popular type of credit is KCC loans, which are assessed in terms of disbursements rather than growth. The majority of crop loans are repaid during the harvest season, and then the cycle repeats itself.
The sale profits have arrived in numerous northern states, such as Punjab and Haryana, in Q1. The majority of the sale revenues are now going straight to crop loans via e-NAM, FCI, and state agencies. As a result, agricultural loans grew at a slower pace in Q1. Regardless, the pick-up took place in July. Between April and July, we virtually disbursed more than Rs 35,000 crore in crop loans. As a result, it reflects the fact that the agriculture sector is performing well and that payments are on track.
What approach would be used to promote rural credit?
SBI now has a portfolio of Rs 2.1 lakh crores and finance the whole value chain, including seed cultivation, seed processing, crop loans, related industries such as dairy and fisheries, as well as warehousing and post-harvest financing. We are also the leading lender to self-help groups (SHGs), which adds to supplemental income in rural regions, whether farm or non-farm.
By transferring the agricultural loan renewal procedure to the YONO Krishi Platform, we've begun a technological intervention with the crop loans. Rural India has a high rate of smartphone adoption. A farmer may now renew his crop loan without having to go to the branch with only four clicks. The app-based renewal procedure will alleviate the strain on my employees while simultaneously benefiting farmers.
SBI is also working hard to boost investment lending. The majority of agricultural finance now centers around production credit, or crop loans. In the current fiscal year, SBI will put a lot of emphasis on investment credit. Will concentrate on agri infrastructure loans, which might include small irrigation, farm gate infrastructure, farmer-owned warehouses, mechanization, and so on. Under the Aatmanirbhar plan, the government has also established a 1 lakh crore Agri Infra Fund (AIF). So far, there are approved loans totaling upto 350 crore under the AIF. SBI has a current investment credit exposure of 10,000 crore, which it intends to increase.
The bank also believes that increasing financing for SHGs has a lot of promise. They’ve developed a Stree Shakti plan to support individual SHG members who wish to establish their own business. Also, started a number of initiatives that will help them grow their portfolio, which is presently valued at about Rs 2.1 lakh crore. In the agribusiness, the goal is to achieve the 3 lakh crore level by 2024.
Steps to attain the Rs 3 lakh crore mark
Apart from using technology to allow farmers to obtain agricultural loans, they are collaborating with NABARD, NAFED, and other organizations to promote the creation of Farmer Producer Organizations (FPOs) and Farmer Producer Companies, as well as develop a financing model. If the FPCs and FPOs are financed, they believe credit absorption will be considerably better. A huge number of agri-fintech firms are also active in providing financial assistance to rural and agricultural households. In each area, such as crop production, dairy, and fisheries, they will shortly announce tie-ups with agri-fintechs.
They're looking into several models for working with fintechs, such as a Business Associate model, where users procure the application and SBI pay a commission, or a Business Correspondent approach, where user procure the application and SBI pay a commission. The bank can also pursue a co-lending strategy if they are participating in funding. SBI wants to enhance and expand their lending through a co-lending strategy with microfinance institutions and non-bank financial companies. They anticipate substantial expansion over there. As a result, the bank is combining their own vast network of 12,000-14,000 branches in rural regions with agro fintechs and microfinance institutions.
Intentions to invest in agri/fintech start-ups?
SBI has a private equity arm that looks for ways to invest in start-ups and fintechs. The bank hasn't set aside any specific funds for this. They will absolutely do so if they perceive a solid chance. They work with fintechs and other start-ups on a regular basis. Many of these fintechs' services are used on their IT platform and even on their YONO platform. SBI is looking at whether or not these engagements may be turned into an equity opportunity. That is a concept that SBI is receptive to.
