FUNDING AGRI BUSINESS

NABKISAN Finance Limited – An Introduction

NABKISAN Finance Limited (NKFL) (formerly “Agri Development Finance (Tamil Nadu) Limited”) was incorporated under the Companies Act, 1956 on 14.02.1997. NKFL is a subsidiary of National Bank for Agriculture and Rural Development (NABARD) with equity participation from NABARD, Govt. of Tamil Nadu, Indian Bank, Indian Overseas Bank, Tamilnad Mercantile Bank, Canara Bank, ICICI Bank, Federal Bank, Lakshmi Vilas Bank and a few Corporates / Individuals. The company is notified as a Non-Banking Finance Company (NBFC) by RBI.

Objectives

The main objective of the company is to provide credit for promotion, expansion and commercialization of enterprises engaged in agriculture, allied and rural non-farm activities. NKFL provides financial assistance for livelihood/ income generating activities by extending credit to Panchayat Level Federations, Producer Collectives, Trusts, Societies and Section 25 companies/ MFIs for on-lending to its member SHGs/ JLGs. The focus of the company in future will also be on supporting Farmer Producer Organisations (FPOs) and Primary Agriculture Cooperative Societies (PACS) with the objective of facilitating linkage of small farmers with agriculture value chains.

Reaching the unreached – Pudhu Vaazhvu Project

NKFL has partnered with the Pudhu Vaazhvu (New Life), an Empowerment and Poverty Alleviation Project of Government of Tamil Nadu implemented with World Bank assistance, in making life changing interventions for the poor women in rural areas. NKFL has in the last three years assisted 230 PLFs with a total credit assistance of Rs.70 crore for more than 24,000 poor women in enhancing their economic life. The increase in income from the projects has also enabled them to provide better nourishment and access to education for their children.

Easy credit access through NGOs, NBFC-MFIs, NBFCs, Agri-corporates, etc.

NKFL also provides credit to NGOs NBFC-MFIs, NBFCs, Agri-corporates, etc., for on lending to farmers, JLGs and SHGs for undertaking various income generation activities. Timely and adequate credit, besides convenient repayment terms have brought about economic upliftment in the lives of members of farming and women community, who were otherwise not able to access credit from the banking system for various reasons.

NKFL has financed Sustainable Agro -commercial Finance Ltd. (SAFL) for financing farmers for adoption of drip irrigation technology resulting into better water and soil management with increased productivity. SAFL is a subsidiary of Jain Irrigation Systems Ltd. (JISL), a pioneer in micro irrigation in the country

Supporting FPOs and PACS

Collectivisation of producers, especially small and marginal farmers, into producer organisations is being given lot of policy thrust to provide improved access to investments, markets, inputs, technology, etc. To address the issue, GOI and NABARD have been emphasising on formation and nurturing of Farmer Producers' Organisations. NKFL provides special focus to meet the credit requirements of these FPOs, so as to make them sustainable business entities in the long run. Further, to enable PACS emerge as 'One Stop Shop' for meeting all the needs of the farmers, NKFL extends credit facility to the PACSs directly, which enables the members to have better bargaining facility in the market as also become more competitive in the long run.

NABKISAN's Loan Products for FPOs.

Keeping in view the credit requirements of the FPOs which are promoted under various programmes, NABKISAN has initially designed five types of Loan Products for extending financial assistance to FPOs, as under:

­Loans to FPOs eligible for Credit Guarantee Assistance of SFAC

­Loans to FPOs / POs not covered under Credit Guarantee Assistance of SFAC

­Loans to Promoting Institutions for on lending to FPOs / Pos

­Emerging FPOs with promising prospects Start-up FPOs

Financial Performance:

NKFL has been improving its financial performance during last few years due to expansion of its activities covering large number of borrowers. The financial performance during the last three years has significantly improved as is evident from the loans sanctioned which have gone up from Rs.19.13 crore in 2012-13 to Rs. 121.37 crore in 2015-16. Similarly, the loans disbursed have gone up from Rs.14.17 crore to Rs. 92.76 crore during the same period with corresponding improvement in profitability.

(Amount in Crore)

Particulars

Share Capital

Loans outstanding

Profit after tax

2013-14

19.98

39.12

2.50

2014-15

19.98

67.03

2.73

2015-16

54.12

116.36

5.96

TYPES OF LOANS

NKFL provides both Term Loans as well as Working Capital Loans.

Other Terms & conditions for sanction of financial assistance

Interest Rate: At present, the loan are extended at rates varying between 11 % to 14% depending upon the activity and the borrower category. Based on the risk perception additional cost may be loaded.

Margin: The borrowers are expected to bring in a margin varying from 10 – 20% of the total financial outlay as their own stake, which depends on the nature of the activity and the borrowing entity.

Security:

Primary security: Hypothecation of assets created out of the loan. In case of buildings constructed with the loan, equitable mortgage of the property shall be done.

Collateral security: The borrowing entity shall provide collateral security, either by equitable mortgage of immovable property, lien on fixed deposits, guarantee etc. In respect of eligible Farmer Producers' Companies, assistance can be granted against the Credit Guarantee Fund of SFAC.

NKFL sanctioned a loan of Rs. 28 lakh to Green Vision Farmers Producers Company Ltd. located at Vadangali village of Nashik district in Maharashtra. This FPO is promoted by Yuvamitra and had a share capital of 5.21 lakh at the time of sanction. The FPO is currently purchasing agro-inputs like fertilizers, pesticides, etc., at bulk rates for supplying it to its members. Thus its members, 520 in total, have access to cheaper inputs. The FPO is also helpingits farmer members in marketing of their output. The current turnover of the company stands at Rs. 65 lakh.