AU Small Finance Bank plans to expand FPO outreach Through Corporate Collaborations

5 Mar 2024 , 10:06 AM

AU Small Finance Bank intends to expand its presence in the agricultural sector by financing farmers’ producer organisations (FPOs), which are proving to be critical agriculture links for major prominent corporations, like Adani Group, ITC, and Reliance.

AU is seeking opportunities to collaborate with corporations that support FPOs and purchase agricultural produce from them.

The bank has so far backed roughly 500 early-stage FPOs representing approximately 1.6 lakh farmers and hopes to raise the number nearly tenfold in the next three years.

We are currently investigating potential collaborations with various corporate entities. Within this sector, there are smaller organizations actively involved as well,’ stated Vivek Tripathi, the head of commercial banking at AU Bank. 

He further explained, ‘Certain corporations have procurement divisions or affiliated entities dedicated to their operations. There exists a significant value chain within this context.’

The bank has an existing collaboration with ITC, providing credit assistance to 225 ITC-enabled Farmer Producer Organizations (FPOs) for their business operations and infrastructure enhancement.

‘Our association with ITC focuses on aiding the initial phases of FPOs. These organizations require additional support, particularly as they heavily rely on government grants,’ explained Tripathi.

The bank has established 275 FPOs on its own throughout western and central India. As of December 31, last year, it has authorised loans for around 500 FPOs worth ₹72 Crore. Of this sum, ₹56 Crore has been disbursed, largely for operating capital. The bank’s entire agriculture loan book is ₹10,350 Crore, with ₹4,542 Crore coming from small and marginal farmers.

FPOs, a platform for small and marginal farmers with land holdings of less than 2 hectares, provide access to improved farming technologies and markets while also helping to cut production costs through economies of scale.

Approximately 8,000 FPOs have registered themselves under a federal initiative introduced in 2020 with a budgeted allocation of ₹6,865 Crore. The government intends to establish and encourage 10,000 such groups across the country by 2024.

For feedback and suggestions, write to us at [e-mail]