Kotak Mahindra Bank doing door-step financing of tractors through mobile app: Shripad Jadhav

Shripad Jadhav, President, Tractor Finance and Gold Loan Division, Kotak Mahindra Bank, says that his bank is successfully implementing door-step financing of tractors. For this, the bank's mobile app-based product has been quite successful. With presence in more than 570 districts of the country, Kotak Mahindra Bank has 11 per cent share in tractor finance in the country. Its growth is better in the current financial year also.

Due to the strengthening of El Nino in the current year, monsoon is weak and this has adversely affected tractor sales. He said this in an exclusive interview on various issues including loan business, term loans, and crop loans for the agricultural sector. Highlights of Shripad Jadhav's interview with Harvir Singh, Editor-in-Chief of Rural Voice:

What is the current demand and growth status of tractor or farm machinery loans? What kind of prospects lie ahead?

The use of technology in tractor finance has increased significantly in the last 8-10 years. When we started giving tractor loans 20 years ago, it used to take 15 days to disburse a tractor loan, today we disburse a tractor loan in one day. Within a day, the customer's loan is approved and payment is made to the dealer. All this has happened because of technology. Kotak Mahindra Bank had started the disbursement as well as collection of tractor loan through mobile app for the first time in the country. This platform is running for every customer for the last 8 years. Our bank's share in the total sales of tractors through finance in the country is 11 percent. Kotak Mahindra Bank finances one in every 10 tractors sold through finance. Of the total sales of tractors, 98 percent are sold through loans. We have presence in more than 570 districts of the country. We cover the entire tractor loan industry and are represented by a team of 5,000 people across the bank. Based on our experience of the last 20 years, we have created different models. I am very fortunate that I started this product of Kotak Mahindra Bank and I am running it even today. It is very rare that you get a chance to work on the same product for the last 20 years.

As far as customer challenges are concerned, earlier the biggest problem faced by customers was the availability of information and dealers. Earlier tractor finance was available only through bank branch. Today we finance by visiting the customer's home. If a customer goes to the dealer to buy a tractor, the dealer gives his information to the financier over the phone and the representative of the financier visits his home and completes the entire loan process. Our bank does this process on mobile app which is completely paperless. Opening of Jan Dhan account has become easier. Today we can disburse the loan in minimum 5 hours but our average time is one or two days. Apart from banks, other financial institutions including NBFCs are also adopting these technologies.

What has been the size of your tractor finance in the last financial year 2022-23?

In the last financial year, Kotak Mahindra Bank has financed more than one lakh tractors. The biggest tractor industry is Uttar Pradesh. After that come Madhya Pradesh, Maharashtra, Karnataka, Gujarat and other states. The market of Andhra Pradesh and Tamil Nadu in the south is also quite big. The impact of lack of rain is more in Maharashtra and Karnataka, hence there is no growth here this year. The growth that is happening is a little growth in some areas of Gujarat, Tamil Nadu and Bihar. Average growth is going on in Chhattisgarh. The situation in Uttar Pradesh is similar to last year. About 1.20 lakh tractors are sold annually in Uttar Pradesh and about 1 lakh in Madhya Pradesh.

What has been your growth so far in the current financial year? From which region is there more demand for tractor loan?

Currently our growth rate is more than 15 percent compared to last year. Due to the impact of monsoon, the growth of the tractor finance industry has slowed down a bit in the last two-three months. The growth of tractor finance industry is one percent less as compared to last year.

Despite the slow growth of the industry, what is the reason for the increase in your growth rate?

Based on the experience of last 20 years, I can say that customers choose us on the basis of the services we have provided to our customers. We have many customers who have financed two or more tractors from us in the last 20 years. He is our brand ambassador. In rural areas, one farmer influences another farmer a lot. Because of this we receive inquiries from many farmers. That's why we are able to grow now. Due to unfavourable monsoon conditions, tractor sales will definitely be affected this year. Many farmers have postponed the purchase of tractors. If the rains of September-October cover the monsoon, then demand for tractors will increase again.

What is the trend of loan repayment? Are the farmers able to make the repayment properly as per your payment schedule?

Ever since we started tractor finance, our USP has been that we have linked the repayment plan to the harvest. We decide the repayment plan according to which crop the farmer cultivates. Our payment plans also range from monthly to quarterly and half yearly. If a farmer is growing vegetables, then he chooses a quarterly plan. Those who have other crops choose the half yearly plan. About 80 percent farmers choose the option of half yearly payment. It is in high demand. There are some areas like South India or Bihar where monthly and quarterly payment plans are implemented because crops are harvested continuously there. Therefore, they choose short term payment plans. Covid-19 had more impact on smaller markets but currently the repayment pattern is much better than Covid.

Apart from tractors, how is the loan growth for other farm machinery and what kind of possibilities are there in this sector?

Apart from tractors, we also finance harvesters or other machinery. Our market share in that is quite high. We have been doing finance in this area for the last 10 years. As far as demand is concerned, since the last three years there has been a shortage of labourers, many farmers are buying harvesters and making a business model out of it. Harvester requires more land. Farmers no longer have much land. Three-four farmers together buy a harvester and develop a business. This trend was earlier seen only in South India, especially in Andhra Pradesh. Now this trend has reached North and West India also. Apart from this, many companies in India have also started manufacturing harvesters with which we have a tie-up. We are doing harvester finance at every location across the country.

What are the possibilities of short-term loans given through Kisan Credit Card? How much loan does your bank give?

At present we are providing short term loans through Kisan Credit Card in Punjab, Haryana, Gujarat, Madhya Pradesh, Chhattisgarh. The impact of Covid was quite high there in the beginning, especially in the second wave of Covid, many farmers faced problems but now its impact has reduced a lot. I would not say that there is tremendous demand in this area. The biggest problem facing demand is that due to the impact of Covid, farmers are choosing old financiers to take new loans.

At Tractor Finance you finance through a mobile app, do you have any such product for short term loans also?

Yes, but branch is necessary for KCC repayment because there are a lot of transactions and there is no door-to-door collection for the same. Right now, we are doing a new experiment in which an app for assessment and monitoring is being developed through satellite imaging. It is expected to start in two-three months. Right now, we are finalizing work on it. We are running this as a pilot project in Maharashtra and Gujarat.

Do you finance Agri-Drones also?

Till now we have not financed the drone because at present the drone is being used only at the experimental level. The companies that provide services are using drones and for this they have working capital. Farmers are not buying drones right now.

Does Kotak Bank also finance projects under Agriculture Infrastructure Fund?

We also finance his projects. We have a division that finances warehousing and agri-based infrastructure projects. We are pioneers in this.

Many farmers of the country still take loans from the unorganized sector which is very expensive. They have very little access to the organized sector. NBFCs also sometimes give very expensive loans. Do you think that farmers are now turning more towards the organized sector for loans and are the possibilities for them increasing in the organized sector in the near future?

There has been a definite increase in credit growth to the organized sector. RBI's condition that it will be mandatory for the banks to distribute 25 per cent of the total loans to semi-urban and rural areas, especially below Tier-3 and Tier-4, has increased the presence of every bank in those areas. Due to this, the trend of taking loans from the unorganized sector has reduced significantly and farmers have come towards the organized sector. The government also has many schemes in which interest subsidy is available. Apart from this, no collateral is required for loans up to Rs 1.60 lakh. The organized sector is benefiting from this. In the coming time, many products will be available for farmers on mobile. Now most of the farmers have smartphones. Farmers do a lot of new experiments, increase the yield and make many decisions. It is not that any farmer will grow only one crop. Similarly, the market availability for it has also increased due to smartphones. He easily gets to know in which nearby market his crop is getting higher price so that he can sell his crop there. Also, given the international situation in which our agricultural exports were not much, in the coming time our farmers will get many such opportunities where they will get the opportunity to export. Ukraine is a big supplier to Europe and other countries. No other country has such a large land to fulfil its shortage. The future of the country's farmers is quite good. The government is also paying attention to network and infrastructure. Infrastructure like cold storage units, warehouses etc. will help the farmers. In the coming times, farming will take the form of a business.

Where is more competition coming from for you, from cooperative banks, public sector banks, private sector banks or NBFCs? 

In present times, banks have become quite aggressive. There is more competition from banks only.