Andhra Bank to raise lending on farm produce

Signs MoU with newly-floated risk management company NCMSL

Andhra Bank is planning to step up lending on farm produce stored in godowns and other storage facilities by farmers in the state during the next few months.

The amount would be much bigger than the current exposure of just Rs 92 crore to this area, thanks to its association with National Collateral Management Services Limited (NCMSL). According to an NCMSL's estimate, lending on commodities during the current season may go up to Rs 250 crore in the state.

Termed as the new business opportunity for the lending institutions in the age of commodity trading, the bank can now lend up to 80 per cent of the value of the commodity against the warehouse receipt based on the certification by NCMSL without feeling insecure.

Andhra Bank today signed a memorandum of understand (MoU) with NCMSL, a newly-floated risk management company that offers risk coverage against any deviation in their certification of quality, quantity and gradation of any commodity.

This bank- risk manager arrangement is expected to help farmers, who resort to distress sale of their produce for want of money. The partnership is also expected to promote rural warehousing facilities in a big way.

Speaking on the occasion, Hari Prasad, chairman and managing director of NCMSL, said that besides offering risk management and certification, the company would also guarantee prevailing market price for the produce of farmers at the time of their taking loan.

"Commodity prices will normally firm up by 15-20 per cent within six months from the beginning of market arrivals in a season. Farmers can now wait for a better price by storing their produce in godowns and avail themselves of loans from banks due to the presence of NCMSL," he said.

According to him, the company targets to achieve up to Rs 750 crore commodity credit disbursement across the country during this year.

Andhra Bank chairman and managing director K Ramakrishnan said that the MoU with NCMSL would further expand the bank's commitment towards rural credit. Agricultural advances of Andhra Bank by March 2005 stood at Rs 3,107 crore, recording a growth of 48 per cent over the previous year. The Kisan Credit cards issued by the bank will soon be made ATM compatible, he said.

NCMSL is promoted by National Commodity Exchange, and Indian Farmers Fertilisers Co-operative Limited(IFFCO) along with seven banks.