Bank Finance for Agribusiness in a Dynamic Setting

In view of the increased significance of agribusiness, the credit assessment of units in the sector has to be made essentially at different levels. In this connection the present credit availability is to be evaluated. Advances made to agribusiness are a part of agricultural advances, direct or indirect. The traditional agro processing units like rice mills, flour mills, oil mills, cashew processing units, rubber processing units and homemade products such as pappads, pickle, banana and potato chips are to be studied with the specific purpose of knowing their credit requirements. The research team approached 200 units in the agribusiness sector in DK district covering cashew, processed food, coir products, home products, areca products, oil and rice mills, rubber processing etc. Besides the team collected secondary data from trade journals, government publications, annual report of banks, report of various trade committees etc. Our field study showed that 61 percent of the units included in the study preferred banks for working capital requirements. Trade credit, accruals and overdraft facilities accounted for the bulk of short term credit facilities. The long term loans from banks included important purposes like establishment, expansion, purchase of land and purchase of vehicles. One of the major findings of our field study was that there were cases of diversion of funds from long term investment to working capital requirements. The banks which had given loans to agri-enterprises in the district didn't mince words when they reported that they could not check such diversion of funds. The study recommended that changing credit requirements of agribusiness units should be separately assessed by the Lead Bank of the concerned district by involving representatives of different categories of these industries and the associations and organizations of which these units are members. Such assessments should be incorporated in the district credit plans