SBI plans to finance contract farming

The State Bank of India (SBI) intends financing contract farming ventures in Vidarbha. The public sector bank is in final stages of talks with Ballarpur Industries Ltd (BILT) to finance farmers cultivating wood for paper factories.

SBI is also negotiating with ginning mills and solvent extraction plants to work out a similar arrangement for processing of cotton and soyabean.

Under the scheme, the bank and the purchaser of the agricultural commodity select a group of farmers which are then financed for their operations.

The venture is a joint effort of the bank as well as the purchaser who eventually buys the product for further value addition or sale. This was disclosed by A Rameshkumar, chief general manager, SBI (Mumbai circle), here.

"Initially the bank plans to have an exposure of upto Rs 3-4 crore in Vidarbha which means around 1,500 farmers will be financed. However, we aim to take this figure to 10,000 farmers in the next year," he said.

It has been decided to start off on a small scale, but the proposal is expected to find many takers once it is introduced, Rameshkumar added.

SBI is the first bank which has introduced this concept. The bank also lends for contract farming for crops such as babycorn, onions, grapes, pomegranates etc, Rameshkumar revealed. The bank plans to have a total exposure of around Rs 40 crore under the scheme.

The bank is also keen on supporting self help groups (SHGs). SBI is targeting to cover around 15,000 to 20,000 self help groups by the year end which will benefit around 2.5 lakh persons.

The bank's Mumbai circle has a total exposure of around Rs 60 crore in SHGs.