A Presentation on EMERGING OPPORTUNITIES IN AGRICULTURAL FINANCE By Sri S S BHAT General Manager Priority Credit & Financial Inclusion Wing, H.O. Bangalore 1

2 Overview of Indian Agriculture. Our Food Production has been stagnating since It is time we started the next round of green revolution Agri Business and Agri Processing should drive the second round of “Green revolution” with diversification of crop production Developed countries have converted their agriculture into Agri-Business

3 India is in the threshold of transforming its Agriculture into Agro- Processing due to; -Huge emerging domestic market with change of lifestyle of people -High potential for exports to developing/ developed countries Agri-Business to create job opportunities in Rural Areas Contd…..

4 Outline of Issues Agriculture growth, an urgent priority -Flow of credit to agriculture is critical & closely monitored Reducing size of land holdings- affecting viability of farming Poor capital formation at farm level-little credit beyond production credit Emerging opportunities – give the edge for building viable models Much criticism-Bank’s predominant short term Production credit & a little term loan Agri credit-as enabler of increased farm productivity

5 Canara Bank’s initiatives in agricultural finance Delivery initiatives- Hi-Tech Agri Finance branches, Agri focus branches with AEO’s & Agri Finance Cells Agri-Business Marketing Units Marketing & reaching Corporate managements Agriculture Consultancy Services – To provide Consultancy services for formulation/appraisal of projects – To take up viability study-of existing projects /stimulus/rehabilitation packages

6  Identify borrowers through Extensive Credit Camps.  Cluster Approach to be adopted.  More thrust to Term Loans and investment loans under Agri Projects  Garner Agri-Corporate accounts by involving ABMOs.  Popularise Value Chain Finance, Contract Farming and Hire Purchase of Farm Machineries  Encourage post harvest finance. STRATEGIES FOR INCREASING AGRICULTURE LENDING

7 Indian Agri- Business as an investment  Corporates – Both Indian and Multinational –identifying agro processing as an opportunity.  Scope for Joint ventures with global players.  Huge potential for infrastructure creation like cold storages, chilling plants, market yards and handling facilities.  Encouraging Contract Farming including organic farming.

8  Investment by venture capitals.  Channel financing and financing modern retail outlets  Private Agri -extension initiatives  Organic farming  Going for Hi-Tech Agriculture like Floriculture, Tissue Culture, Aquaculture.

9 Individual would chose a project which…. - Gives more benefit than cost - Maximum rate of return among alternatives - Adequate return in quickest possible time Banks would choose projects which would.... Give enough incremental income to repay principal & interest Leave some surplus to improve standard of living of farmers Give quicker return to borrowers Sufficient Cash Generation for repayment obligation. STRATEGIES FOR CHOOSING PROJECTS

10 Agro Based Industries  Project Financing Appraisal of Projects & Syndication of Loans Long term Loans in local currency and foreign currency for buildings, machinery, technology upgradation.  Working capital facilities  Export financing  Term Loans for Upgradation of existing units to adopt modern technology/ Standards

11 Financing opportunities for Commercial Banks Post harvest management  1/3 rd of fruits and vegetables produced in the country are wasted due to poor cold storage and handling facilities.  Cold Chains – controlled atmosphere cold storages for fruits and vegetables, Milk chilling plants, Refrigerated vehicles  Creation of market yards and other infrastructure  Financing quality testing and certifying agencies  Labeling and Packaging industry

12  Food parks with common facilities for storage, effluent treatment etc.  Finance against goods stored in warehouses – in association with Collateral Management Companies.  Bill discounting facilities to agriculturists against acceptance of Bill of Exchange by the purchasing company.  Opportunities in price risk mitigation using commodity derivatives.

13 Contract Farming / Tie-up arrangements  Sugar cane  Cotton  Broiler Poultry  Seed Production  Grapes  Vegetables  Gherkins  Dairy  Aqua Ventures  Spices Processing  Rubber Farming  Winery Units FINANCING OPPORTUNITIES

14 Agro Based Industries Some examples  Seed production  Fruits and vegetables processing & Vineries  Food grain processing  Meat and meat products, Egg powder  Marine exports  Extraction of oleoresins, Natural dyes  Extraction of aromatic compounds  Bio fertilizers, Bio pesticides  Bio Technology

15 AGRO BASED INDUSTRIES – FOOD GRAIN PROCESSING - Flour Mills, Wheat atta/suji, Rice Mill, Corn flakes – PROCESSING OF FRUITS & VEGETABLES - Mango, Pineapple, Litchi, Guava etc. for pulp production with aseptic packaging for exports – FREEZE DRYING OF PRODUCTS (IQF) - Potato chips, French fries, Peas, Culinary Herbs

16 WINERY UNITS - French varieties of grapes SEA FOOD PROCESSING - Tiger prawns, Shrimps & other fish products PROCESSING OF MILK - Processed Milk, Cheese, Butter, Ice Cream etc. PROCESSING OF MEAT & MEAT PRODUCTS - Poultry, Lamb, Pork etc

17 Aromatic & Medicinal Plants - Extraction of essential oils / compounds viz. Ashwagandha, Rosemary, Coleus, Patchouli Spices & Condiments - Extraction of Oleoresins Bio Diesel Production - Jatropha, Pongamia Natural Dyes - Annato

18 POST HARVEST MANAGEMENT - Rural Godowns, Warehouses promoted by Govt. Cold Chains -Controlled Atmosphere Cold Storages - Milk Chilling Plants - Refrigerated Vehicles Irradiation Plants – Use of gama rays to improve shelf life - Cereals, Pulses, Meat, Onion, Potato etc.

19 Capital Investment Assistance (Subsidy) - National Horticulture Board (NHB) - Agricultural and Processed Foods Export Development Authority (APEDA) - Department of Agriculture & Co-operation - National Horticulture Mission

20 To sum up- Agriculture growth, a priority for an inclusive growth. The road ahead offers a promising opportunity as well as challenge for Indian Agriculture. The role of banks more specifically the Field level Officers ( AEOs/ROs) is crucial in providing the much needed credit for capital investment and meeting the need of Rural Poor. Visualise the emerging business opportunities and be a proud partner in ushering in another era of excellence in agriculture production.

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