An Overview

Manoj RawatHead, Agribusiness GroupRBL Bankmanoj.rawat@rblbank.com

PRIORITY SECTOR BUSINESS

AgriCorp 20154 November 2015

Mumbai

Priority Sector Philosophy1. Credit flow to viable, creditworthy and needy sectors that may

not get timely & adequate credit

2. Lending directly to beneficiaries, not through routing them

through intermediaries

3. Consider PSL as normal business operation for banks

4. Develop innovative structures, products and processes to

address Agri and Rural customers

5. Addresses key areas- Food security, Financial Inclusion, Growth

and employment.

2

BreakupSl. 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-EnterprisesOnly 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

Priority Sector Lending

Priority Sector Lending

Priority

Sector

.

.

Agriculture minimum 18%

MSME min 7%

Export credit

Education loanRenewable Energy

Social Infra

Rural Housing

Small & Marginal Farmers 7%- 8%

Priority Sector LendingAgriculture

MSE

Education

Housing

Export Credit

Renewable

Small & Marginal Farm Credit(7%-8% of ANBC)Agri & Agri allied activities

Farm Credit 10-11% of ANBCFarmers/corporates / partnership firms/Agroprocessing

PSL

40 % of ANBC*

18 % of ANBC

FY 15-16 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

*Adjusted Net Bank Credit

Others

GDP versus Credit

FY09 FY10 FY11 FY12 FY13 FY14

15.71

14.6214.45 14.37

13.95 13.94

% Share of Agriculture to GDP

FY09 FY10 FY11 FY12 FY13 FY14

338,658416,133

483,466546,626 589,914

669,438

Bank credit to Agriculture and Allied Activities (in Cr.)

Agriculture and GDPShare 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”

Credit flow to Priority Sector Lending

Priority Sector Lending

Agriculture Sector Lending

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-150

2

4

6

8

10

12

1.05 1.41 1.75 2.25 2.80 3.25 3.75 4.75 5.757.00 8.00

1.251.80 2.29 2.55 2.87

3.854.68 5.11

6.45

8.34 8.45

2004-052005-06 2006-07 2007-08

2008-092009-10

2010-11

2011-12

2012-132013-14

2014-15Target Achievement

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -

5

10

15

20

25

30

3.78 5.42 7.06 7.34 9.05 10.85 12.77 15.78 18.58 21.68

4.03 5.47

7.03 8.22 9.65

11.40 13.44

14.97 16.97

21.74

20052006

2007 20082009

20102011

2012

20132014

Target Achivement

(Amount in Rs. Lakhs Crore)

9

Low income

Middle Income

High

Socio-economic profile Market ApproachVarious Customer Segments being addressed

Large farmers, horticulturists/ orchard owners

floriculture

Medium & small farmers with cash

crops and large dairies

Small & marginal farmers with non

cash crops and cattle / livestock

owners

Pre Harvest

Post Harvest

Agri Infrastructu

re

Allied Loan

Crop loan ,- KCC

Land Development Irrigation Loans

Farm Equipment

Commodity Finance

Irrigation facilities

Post harvest transport

Consumption Loans

Investment Loans

Small & Marginal farmers- Focus of PSLInclusion of 8% Agri Lending guidelines has created strong challenge in distribution of credit

• 6 crore small and marginal farmer is 6 crores

• Most vulnerable section of society

Covering Small & Marginal Serves multi purposes- Priority Sector Target- Weaker Section Target - Financial Inclusion Target

11

Market approach Farmer Finance

Land Development Irrigation Loans

Farm Equipment

Commodity Finance

Consumption Loans

Investment Loans

Irrigation facilities

Post harvest transport

Pre Harvest

Post Harvest

Agri Infrastructu

re

Allied Loan

12

Capture entire supply chain

CORPORATE AGRI

AGRI VALUE CHAIN RETAIL AGRI

COMMODITY BUSINESS

13

RETAIL AGRICORP 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 processingDealers/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.

Segments of Agribusiness

Key Design Principles 14

Simple & standardized processes

Technology as a key enabler

Complete product offerings

Scalable & viable business model

1

Close proximity & deep understanding of customers

Staff with grass root knowledge

2

3

4

5

6

7

Achieve double bottom-line

Achieve Double Bottom Line

PSL Targets

Sustained Profits from

Agri business

Socio-economic growth of our

customers

1 2

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

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

Vagaries of nature Debt Waiver

Farmer in DistressNatural CalamitiesDroughtUnseasonal RainsHailstormsCold Wave

Populist measuresDebt waiversVitiates Credit Culture

Low ProductivityDepleting water LevelFalling commodity PricesPoor Infra structure

High cost of credit delivery

Challenges in distribution of credit

Diversion of

Funds

Diversion of Produce

Farmer Payment Risk

Price RiskPrice Risk Yield RiskYield Risk

Agri Produce Risk

Corporate Payment Risk

Liquidity Constraints

Liquidity Constraints

Non payment to Farmer

Non payment to Farmer

Risk Elements

KEY RISKS

Other Key Risks:1. Vagaries of Nature

2. Political Risk

3. Market Risk

Value chain entity

Integrating Value chain Entities

Month 1

Month 12 - 15

Assist farmers in getting the documentation for loan, and support in giving inputs for farm

Credit Assistance

Sells produce to entities

Pays the Balance amount

Month 2 - 12

Value chain entities provide technical support &Constant monitoring of crop

Corporate Risk Sharing

Value chain entity

Repays the loan installm

ent with interest

Value Chain Entity

1

2

3

4Viz. Dairies, Food processing, Fruit & pulp processing, Sugar Mills, Irrigation companies etc.

Simple & Efficient Process

20

TEMPLATE DRIVEN PROCESSES

PROCESS CHECKLIST

FIELD CHECKS

APPRAISAL AND QUALITY CHECK

• Control through Risk and Operations •System Validations • End use monitoring• Alerts for early warning and probable NPAs.

CONTROLS / CHECKS

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 ProcessSG – Solidarity Group Loan

CUSTOMER VALUE PROPOSITION 21

21

• 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

Timely availability of adequate credit to the farmers

Longer customer embedment

Services offered keeping holistic customer’s needs in mind

Convenience to customers

Unlocking the Agribusiness Potential

Rural & Agribusiness at the centre of Economy

Rural Banking Spectrum

Agri Banking

Farm Equipment

Micro BankingRural HousingPayment & Remittance MSME

Rural India Village : 2020MODEL VILLAGEWith modern amenities Because it will have1. A wi-fi connectivity across all the houses2. Best educational facility with school 3. Concrete roads4. Primary & Secondary Health care with advance eye,

dental & maternity care5. Agriculture production with advanced agriculture

techniques giving high yield6. Online pricing access and monitoring of crop and

commodity7. Village level Aggregation and Market centre8. Agri-based textile & processing industry 9. Its own water filtration plants providing pure water10. Its own green energy source like wind mills, solar

energy May 20, 2012: Times of India

A modern day village would look like

Aggregation

Centre

To conclude….Also achieve 1. Statutory PSL

Targets 2. Regulatory

goodwill

Sustained Profits from

Rural business

Socio-economic

growth of our customers

1 2

20% 80%

Planning Execution

i

KEY OBJECTIVES1. To build a robust agribusiness portfolio which creates value for the farmers, stakeholders

and the bank.2. Create a strong base of agri customer through value added offerings and customer

engagement initiatives3. Capture the banking requirements and cross sell opportunities across the entire Agri-value

chains 4. Create sustained revenue stream for the bank

Manoj Rawat, Head, Agribusiness Group

RBL Bank, Mumbai

Agriculture only can address the “twin areas of concern” “Food security” & “Financial

Inclusion”

Thank You