In order to assess the credit-worthiness of farmers amid the coronavirus-induced economic uncertainty, ICICI Bank Limited IBN is using satellite data. The move is expected to help in reducing travel costs as well as time for both the lender and farmers.
The use of such technology to assess agricultural loans is a first for the banking industry in India.
Typically, in order to forecast farmers’ revenues to make loans to them, Indian banks have been deploying officials who travel hundreds of miles to assess irrigation systems, crop quality and land location.
This process takes a lot of time. In fact, given the current global scenario, technological advancement is the most effective method that any bank could use. When banks use satellite images, it provides them a quick and technically sound analysis of the land, crop and irrigation patterns from remote locations. Also, the use of such technology gives farmers the advantage of reliable data being provided to the bank without any hassle of travel expenditure.
Notably, ICICI Bank is using almost 40 different set of readily available satellite images from Indian Space Research Organisation (“ISRO”), and National Aeronautics and Space Administration (“NASA”). It is partnering with agri-fintech companies that specialize in harnessing space technology and weather information for commercial usage.
Over the past two years, the bank has been piloting the project in select few villages but is now extending the same to 500 villages in Maharashtra, Madhya Pradesh and Gujarat.
The bank’s executive director, Anup Bagchi, said, “We will cover 25,000 villages over the next one month and scale it to 63,000 villages over the next two month.”
ICICI Bank’s profitability is expected to continue to improve in the near term, supported by increased dependence on domestic loans as well as growth in demand for retail loans. Also, the company’s digitization efforts are likely to support fee income growth, going forward. However, owing to the bank’s technology investments, expenses are expected to remain elevated, thus, hurting the bottom line to some extent.
Shares of ICICI Bank have gained 25.5% over the past three months compared with the industry’s growth of 5.3%.
Currently, the company carries a Zacks Rank #3 (Hold).
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