It is an irony that as we type this note comes the news that RBI had punished 7 banks, private, foreign and PSU banks for violating IPO norms! The fines for the IPO scams run from Rs.25 lakhs to 5 lakhs. The point is that some of the superstars are also found to be indulging in this sort of fraud.
Why we say this?
We are having an agri media business for some two decades and we have commented on the banks in the agri lending practices over the years. We have created awareness among the bankers, farmers, the government departments and the various ‘stakeholders’ how promoting agriculture, creating wealth in agriculture through independent enterprises is a near impossible job! And yet we have succeeded in a positive way in the sense that thanks to our persistent efforts we have created a lot of independent entrepreneurs, small and medium entrepreneurs who have overcome the obstacles to invest in agri ventures.
Our agri consultancy wing has now gone for promoting some small scale agribusiness ventures. There are some already in operations, others in various stages of progress.
The latest to hit the barrier is a mango powder with an investment of nearly Rs.2 crores. The Andhra Bank which showed interest in funding this project (in AP) had done some ground work, of course. They wanted to find out the technology. Fine. They wanted to find out the market for the end product. Fine. They wanted the names of firms that have bought the end product, we have supplied the same. After having gone thus far, the entrepreneur having invested nearly one crore the bank once again asked whether there is really a market. To find it out the bank asked the Central Food and Technology Research Institute (CFTRI), Mysore, the bank asked a scientist there to know whether there is a market for the end product. The scientist, whoever he is, is reported to have told the bank that there is no market. This, the bank used it to ask counter questions as to the feasibility of the project or the marketability of the end product.
We told the banker: “Look, the CFTRI scientist may not be the competent man to give the market information. No government department can take responsibility for marketing a product. It is often the private agency that undertakes the implementation of the project that can only explore and find out the new markets for the products in question. We are the Consultancy and the market assisting agency.” The bank then went on to find out whether the private firms that are given to the banks are genuine or not! Thus, the project is delayed or made to delay by ignorant bankers.
Our experience in dealing with banks (PSUs, foreign and private) is uniformly is this: bankers as a lot are ignoramus outside their lending expertise? They may know many things. Certainly, they should be glad to tell that in agriculture they have not much knowledge. Indian agriculture in the last 60 years had developed as a government-controlled activity. So, not much diversification had taken place. The many bank agencies like NABARD had all strayed away from their original mandates and they too have become very bureaucratic. In this environment, there can’t be any scope for private sector initiatives, more so the small and medium sectors in the agri sector.
There is a heavy backlog of underdevelopment in the agri sector. This can be broken by determined efforts to create wealth through SMS by various innovative projects. This where Vadamalai had pioneered not only India’s only agri media company, both in print media (English and the regional languages) and also the Internet (agricultureinformation.com)in the respective domains we are commanding a high brand value already.
The point we want to bring to the attention of all bankers is that there is a need for involving private sector players in accelerating agri credit into many new innovative agro enterprises. It is here we like to draw the attention of bankers to some home truths.
There is a misconception among the bankers that there must be a buy-back guarantee. This is a falsehood. No serious and genuine buyer will give an advance buy-back guarantee to buy a product before the unit is established the first samples conform to his quality requirements. So, the many buy-backs guarantee assurances given, if any, by Consultants or others is only a sort of assurance. Also for new and innovative products that are developed by private technologists, it is the joint efforts by private Consultants, technologists and the prospective entrepreneurs that are the critical steps before an enterprise is established. The element of risk is a character of any new entrepreneurship. No one is willing to risk his funds unless he has the confidence to make his investments a success.
Unless banks learn to recognise this crucial difference between a government activity and a private sector activity, no private sector investment will flow into farm enterprises. We are glad to note we have also succeeded in convincing many PSU banks, SBI, CBI etc. But the average banker is an ignoramus in agri ventures. This is no fault of his alone. It is a result of the collective evolution of agri policy in this country. Even today, tall talk is a character of agri policy.
What we at Vadamalai have done is to break this common mould of imagining agri sector is a sector for the poor and the ignorant. The educated and enterprising new generation farmers are coming to create wealth in the farming sector. There is a need for bankers to cut down the deadwood that have been created in creating high tech branches. They don’t function in most places. Also bankers try to avoid agri projects.
We want bankers to identify themselves with the rural people around them. We want the bankers to be realistic. No government department or research agency will be able to say they will provide the market or find out the market for products. It is the job of private sector players only. Please try to understand this first. Believe the private sector players with some background. Don’t believe the government agencies whose job is different. No government will create wealth for farmers. It is the justification of the private sector!
So, we request the bankers, more so the enlightened bank chairmen to suitably issue directions for the agri departments to become more realistic and take some risks too! It is better, we believe, to trust the genuine rural person than the salary-driven government servant!