March 27, 2023
On March 23, the Japan International Cooperation Agency (JICA) signed a loan agreement with IndusInd Bank Limited (IndusInd Bank), a private commercial bank in the Republic of India, for private sector finance of up to 13 billion yen. This loan aims to improve access to finance for farmers and increase agricultural productivity in India. Citibank N.A. is the sole arranger, coordinator, and agent, as well as a co-financer for the transaction.
The agricultural sector is an important part of the Indian economy, accounting for approximately 17% of the country’s GDP and 50% of its employment. However, the standard of living of farmers remains low, at about 50% of that of regular urban workers. As the need to improve both agricultural productivity and the income of farmers increases, there is also an urgent need to improve access to finance to further stimulate capital investment in the agricultural sector.
The Government of India and the Central Bank of India have been promoting loans to the agricultural sector under the Priority Sector Lending (*) initiative. This loan will support the efforts of IndusInd Bank, one of the country's leading private financial institutions, which is enhancing its lending to the agricultural sector by leveraging its strength in having many offices in rural areas. The funds will be used by farmers to purchase farm equipment, quality seeds, and fertilizers, and will be sub-loaned to the agricultural sector for capital expenditures.
This loan will help reduce disparities in India by improving financial access to projects that contribute to solving the country’s agricultural issues. By doing so, it will also contribute to SDGs (Sustainable Development Goals) Goals 1 (No poverty), 8 (Decent work and economic growth), and 17 (Partnerships for the goals). It will also strengthen India's agricultural production capacity, contributing to food security despite concerns about rising food prices and supply shortages due to global instability. JICA will continue to support access to finance not only in India, but around the world, and will mobilize private sector funds for such projects.
(*) Priority Sector Lending: Reserve Bank of India, "Master Circular-Priority Sector Lending-Targets and Classification.” The priority sectors specified are (1) agriculture, (2) MSME, (3) export credit, (4) education, (5) housing, (6) social infrastructure, (7) renewable energy, and (8) others. The agricultural sector is charged with allocating 18% of its loans.