Lack of Pric­ing Model

Banking Frontiers - - Cover Story -

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.

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