Icici Bank Plans Rs 2500 Crore Agri Lending

With corporates shying away from bank credit, ICICI Bank is focusing on agriculture. The bank has already extended credit to hundreds of farmers to cultivate 50,000 acres of land through contract farming across the country.

To ensure the success of this experiment, it has roped in corporates such as HLL and Rallis. The companies will either provided inputs for cultivation or buy the output.

The bank plans to offer credit of around Rs 2,000-Rs 2500 crore to the agriculture sector in this fiscal through tie-ups with a string of corporates for contract farming. The major crop through this route is wheat followed by rice, cotton and vegetables.

 

ICICI Bank had on an experimental basis in Indore worked with Rallis and HLL. P H Ravi Kumar, chief general manager, said, "Rallis provided the seeds, pesticides, fertlisers and other inputs while HLL took over the wheat produce. The experiment which had started off with 250 acres two years back is now spread over 7,000 acre in one location itself."

From 5 per cent of the wheat produce for its total requirement which HLL outsourced from these farms some years back the outsourcing has now grown to 12 per cent. Also 30 per cent of its rice requirement will be outsourced to these farms by the corporate.

The limit sanctioned by the bank for only wheat and rice farming this season was at around Rs 35 crore. The bank is also getting into collaboration with companies to produce cotton.

The total area of contract farming is spread over six to eight locations across the country. "The bank is planning to finance contract farming across the country so that the systemic risks of being only in a particular area and a single crop are mitigated. The bank taps both corporates and non-government organisations for this contract farming model. The opportunities are identified first and then the bank works backwards with them," says Kumar.

The bank is also looking at lending to plantation, dairy and seed companies among other than through the contract farming model to help it achieve the Rs 2000-2,500 crore of credit offtake this fiscal.

The bank had also recently signed an pact with Punjab Agro Industrial Corporation where all the agro projects of the corporation will be funded by the bank.

"We will structure all the projects of the corporation like finding partners for the projects as well as lending to such projects. We will help the state diversify from pre-dominantly wheat and rice into fruits, horticulture and other value-added products. This will help the transfer the state from a primary agriculture economy to going up the value chain."

The bank plans to lend Rs 300-400 crore through the corporation in this fiscal.