Faced with falling volumes, especially in agricultural commodities, collateral managers empanelled with comexes have now moved beyond farmers and started financing intermediaries in the agri value chain through their NBFCs (non-banking financial companies). Banks have not tapped these areas of new businesses due to a lack of adequate collateral assets with the intermediaries.
Almost all collateral managers, including National Collateral Management Services Ltd (NCML), Sohan Lal Commodity Management (SCML) and Star Agri have floated NBFCs for financing to agri intermediaries with an estimated lending potential of around ~90,000 crore. These intermediaries include small traders, farmers’ organisations (FPOs), agri processing units, and small and medium enterprises (SMEs).
Sandeep Sabharwal, group chief executive officer, SCML, which finances the entire agri value chain, said, “Kissandhan Agri Financial Services (Kissandhan), a wholly-owned subsidiary of the SCML Group, has been offering agri financing solutions to farmers, joint liability groups, individuals, proprietary firms, partnership firms, SMEs, processors, millers, traders and all other agri intermediaries.
Kissandhan has changed the paradigm of collateral financing by providing loans purely based on agri collateral without any security and irrespective of the net worth of the borrower. SCML has turned the tables on others by offering finance against agri commodities as collateral without the need for any additional security.”
Market surveys found banks giving agricultural loans on collateral and insisting on securities such as land, houses and vehicles. The turnaround time for issuing loans is 7-30 days and the financial statement of borrowers is considered to evaluate their credit worthiness.
Sanjay Kaul, managing director and chief executive officer, NCML, said, "NCML provides procurement services and supply chain solutions (including finance) to bulk consumers, big end-users, exporters, processors and farmers. These end-to-end supply-chain solutions include testing and grading, procurement, storage and finance. Some of these customers earlier relied on local commission agents for procurement and using non-institutional lenders. Banks are not able to reach such customers on account of their low net worth and poor financials whereas NCML depends on the stock value and not the balance sheet of the entity.”