Lack of Pricing Model
Banks, even when they have presence across India, continues to face the challenge of creating a productive model to rach to the right customer. This was the opinion of a senior banker who is an expert in agri-financing and heading a top private bank. Says the banker: “Measuring the productivity of the customers and identifying stressed customers are the challenges banks are facing.”
The banker talks about how the bank merged its existing customer data base with that of a technology company and how it is now collecting multiple datasets around agriculture to come out with innovative lending models.
The banker also pointed out that every state in the country is undertaking digitization of land records and this has in fact helped banks in general to create synopses of every village which in turn helps them to offer the right combo of funding for every farmer. This same data has very often been shared with the lending team and helps banks to target the right village and increase the lending accordingly.
Farm-level data help in a major way in the digitization of lending and improving turnaround time. Agri lending, according to a senior banker, is based on land records and farm geography, which are required to analyze risks associated with it. “The challenge,” says he, “is to identify crops. If a farmer grows different crops, then he is not eligible for insurance. Total insurance coverage of farmers is not possible because the data required for such coverage is not available. Most of the farmers who are eligible for insurance cover, in fact, do not get that cover.”
He says there are cases where farmers who are ineligible for insurance get covered while those genuinely eligible do not get the cover. The whole ecosystem of lending depends on the availability of digitized land records and the right insurance claim settlement mechanism, he says, maintaining that today we are working in silos and creating a system is a challenge.
He mentions that a major bank has recently launched an app to engage with farmers and provide them advice relating to everything in farming. In agriculture lending, says he, it is very critical to engage with the customers. Banks are giving financial advice and end to end digitization to customers. So, if the right kind of farm data is available, then banks can provide end to end loan digitization.