DCB to focus on contract farming

Mumbai-based Development Credit Bank (DCB), which has a dominant presence in Western India is all set to initiate financing of contract farming in Gujarat

Talking to Business Standard, Pravin Batra, executive vice president corporate & business banking group, said, "We will focus on contract farming in Gujarat as the state is rich in cash crops."

He further said that under the Reserve Bank of India (RBI) norms the bank needs to lend to priority sector and contract farming being a part of agriculture sector, the Bank will be fulfilling the norms.

Presently the bank falls short in fulfilling RBI norms of extending at least 40 per cent of its net bank credit to priority sector. The bank's advances to priority sector are reported to be 32.73 per cent.

As per Batra, contract farming is seen as a promising sector which will indemnify the bank from high risk that is mostly associated with agricultural sector lending.

Earlier, the bank had entered into contract farming in Andhra Pradesh.

Officials from the bank said financing contract farming would benefit the farming community as the farmers will get their money for the crops in advance and the bank will be able to earn higher margin when the crops are sold to the third party.

Batra also said that the bank expects to be better positioned to procure higher price or get the payment for the crops made by the companies.

On their plans in Gujarat, Batra said that the bank is trying to secure one or two deals but nothing had been finalised yet. The bank is trying to get contract farming in Sidpur taluk at Mehsana.