Agriculture is identified as one of the top beneficiaries in the priority sector lending mandate for banks by the Reserve Bank of India. According to this mandate, banks are required to encourage the growth of such sectors with adequate and timely credit. In Budget 2021, the Indian government raised the farm loan target to Rs 16.5 lakh crore for fiscal year 2022, compared to the Rs 15-lakh-crore target in the preceding year. However, banks face immense challenges in meeting their requirement of disbursing loans to small and marginalised farmers due to high perceived risk of default, non-digitisation of farmlands leading to increased cost of verification and unavailable credit histories.
Dvara E-Registry’s Solution for Credit Underwriting: To help banks create a profitable agricultural portfolio, Dvara E-Registry offers a tailor-made analytics solution called KhetScore that helps banks make informed, data-backed credit underwriting decisions that ensures crop loans are issued to productive farmers (who may not get loans because of credit history), increasing the size and quality of the bank’s agricultural loan portfolio.
KhetScore is a farm analytics package that enables multidimensional assessment of land parcel productivity derived from independent data including land parcel specific satellite and weather data. Dvara E-Registry provides the analytics by leveraging multiple proprietary AI algorithms that use many years of historical data. The KhetScore Analytics Package offers season-wise data for various parameters that help banks assess the productivity and risks of a farmer’s agricultural activity. This helps make informed underwriting decisions.
The parameters considered are:
- Geo Referenced Plot Details to verify the existence and location of the plot
- Verification of geo referenced plot with government survey numbers in select states of India where plots have been digitised
- Land use classification to ensure that the plot is being used for agriculture using AI algorithms
- Historical land parcel level drought and flood occurrence
- Season wise assessment of plot productivity (sowing frequency), crop health, plant moisture, soil moisture, nutrition and mechanical damage
- A historical weather and temperature range analysis for the plot.
- An overall KhetScore that integrates this multi-dimensional analysis into a single score that ranges from 0 to 100 which can be used as an underwriting criterion. You can read more about how we generate the KhetScore here.
Using the KhetScore analytics package, a bank has clear independent alternate assessments of a farmer’s capacity to repay a loan and the appropriate size of the loan. This supplements traditional credit analysis and is especially important in the absence of credit histories for new to credit farmers.
Gateway to New to Credit Farmers
With the use of KhetScore, financial institutions can include “New to Credit” (NTC) farmers to their agricultural loan portfolio. This segment is a huge market – In its 2019 report, the Reserve Bank’s Internal Working Group to Review Agricultural Credit estimated that despite numerous existing initiatives, at most, only 40 per cent of India’s small and marginal farmers are covered by formal credit. This means they have no credit history to show, and no formal documentation. So, it becomes harder for lenders to assess the likelihood of default. This translates to the fact that around 60% of India’s small and marginal farmers are relying on informal credit and paying high interest rates due to the lack of access and lack of a good credit score to be eligible for a formal agricultural loan from a bank.
Dvara E-Registry’s Solution for Crop Monitoring:
To complement the pre sanction analytics, Dvara E-Registry also provides real time monitoring analytics that allow banks to track crop loans through the crop season on multiple crucial parameters like growth stage, exact sowing date and expected harvest date. These features help banks recall loans if evidence shows that farmer has not cultivated or plan for repayment based on the expected harvest date. KhetScore now also provides scores for bio physical parameters like crop health, nutrition, plant moisture and soil moisture. This data will help the farmer rectify problem areas before it is too late. When required, Dvara also provides customised advice for a given plot. Using crop monitoring technologies like KhetScoreNow will help the banks save substantial costs which otherwise would have been diverted towards field personnel travelling to each farmland for periodical crop monitoring. Dvara E-Registry also offers API integrations for KhetScore and KhetScore Now that enable banks to access these analytics through their own credit underwriting and monitoring platform.
Recently, Dvara E-Registry partnered with agri value chain providers and financial institutions to provide loans to small and marginal farmers using KhetScore and KhetScore Now in various states of India. Read about it here and here.
Other Service by Dvara E-Registry
With a goal to make agricultural loans profitable for all stakeholders, Dvara E-Registry not only offers analytics services but also business correspondent services to banks for agricultural lending in facilitating end – to – end lending process. To support farmers and farmer collectives (FPOs), Dvara E-Registry, through the Doordrishti integrated platform provides crop advisory, market linkages and other productivity enabling services that help the farmer succeed.