HDFC Bank digitises dairy cooperatives and makes farmers smile

Over 3 lakhs farmers in 16 Indian states receive payment directly and instantaneously into their bank accounts. Become eligible for loans; digitisation grows farmers business

Farmers in India usually transact against cash transactions. The easy liquidity, transparency and security of cash may be a reason for this. Most farmers have never seen a bank and do not have a bank account – not out of ignorance, but more so because of inaccessibility. It’s a long walk to the nearest branch, that takes up the better part of the day; and then they would have to stand in long queues. But what if the bank comes to their doorstep? Over three lakh farmers in 16 Indian states are now realising the benefits of doorstep banking, and it is actually contributing to their wealth and prosperity. These are farmers from dairy co-operatives across India, and they have to thank the HDFC Bank for setting up the Milk to Money (M2M) programme. Under the aegis of M2M, HDFC Bank has digitised 1,200 dairy co-operatives in the country; 3.2 lakh farmers have benefited so far. 

Launched in 2010, M2M is aimed at bringing dairy farmers into the organized banking system, digitising the entire dairy value chain, and bringing to them products that meet their banking and financial needs. The move improves cash flows for farmers besides bringing in greater efficiencies for all stakeholders. 

The project was started in Gujarat and Rajasthan and is now running in 16 states, which include Maharashtra, Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Odisha, Jharkhand, Bihar, Assam, Meghalaya, Tamil Nadu, Kerala, Karnataka, and Andhra Pradesh. The programme has gained momentum post demonetisation with massive growth in the number of co-operatives after November 2016.

How M2M works

Here’s how M2M works. The farmer brings his milk to the collection centre where it’s tested and measured. This data is recorded in a PC terminal and is uploaded into the HDFC ENet system. From the ENet system, the money is transferred via straight through processing into the individual accounts. 

Earlier, the money came to the co-operative, which pays cash to the farmer. Things have changed now with M2M -- with the click of a button the amount can be transferred to the farmer’s bank account. The data captured at the terminal is uploaded to HDFC’s system, without the need to do any additional data entry. 

The ATMs and BC enabled Micro ATM’s  that enable the farmer to withdraw money are connected to a switch and to NPCI. 

Michael Andrade, Head – Agri Business, HDFC Bank informs us that a straight through system for instantaneous credit to the farmers account at the time of pouring the milk  has been demonstrated at some of the larger societies, however, for the moment the Societies stick to their usual weekly or ten day payment cycles for various reasons. 

“As soon as the milk is accepted there is a facility for direct payment to the farmer’s account. This happens instantaneously,” said Andrade. 

Farmers can access their bank accounts and withdraw cash whenever they want. Milk to Money ATMs at larger collection points have cash dispensers; smaller collection points are equipped with Business Correspondent (BC) operated Micro ATMs. These micro ATMs are Aadhaar enabled. 


The transparency in the milk collection process benefits both farmers and the society, as payments are made quickly without the hassle of cash distribution. And since there is no middle man involved, there is no scope for short changing farmers.

Having a bank account brings many benefits to a farmer. The payment coming into the farmer’s bank account creates a credit history, which makes him eligible for various loans, with which he can buy more cattle, avail a vehicle loan , personal loan or a crop loan He can increase business and avail of other banking products. Farmers can also receive the direct benefit transfer from the government in the same account. 

“When money came into the farmer’s account, he realised, for the first time, how remunerative this business was. Earlier, they’d receive cash and spend it. So they did not realise the potential of the dairy business. They got bulk money from their crops,” said Andrade. 

HDFC Bank provides various kinds of loans to the farmers and the applications can be made through the BC. 

For cattle loans, for instance, the farmer needs to provide his address proof and ID proof. A veterinarian examines the cattle and provides a report. The insurance company will then issue a health certificate and insurance policy. The loan is then disbursed and the process takes 2 – 3 days. The insurance company captures all data through an app on the phone, which is connected to the HDFC Ergo system. 

The other banking products offered are tractor loans, two-wheeler loans, personal loans, gold loans, kisan credit cards, overdraft, and fixed deposits.

“We have seen even lady farmers taking loans from us to buy cattle. Some started with one or two cattle and today they own 10. Now they earn more from the dairy than from crops,” said Andrade. 

The project has also resulted in benefits for HDFC Bank. Andrade informs that its business had grown substantially every year. “The aggregated liabilities from multiple small accounts (loan book) is more healthy now; we have significantly minimised the NPAs,” said Andrade. “It has also introduced certain corporate structures.”

Further, the collections cost has come down significantly since the need to follow up with the farmers for loan repayments is obviated. There is no cash collection as it is a straight debit transaction. So there is no longer a need to send a  bank staff  to the farmer to collect payments (cash). The cost of collection  would often exceed the income generated from small value of the loans. Which is significant when we consider that a major portion of our farmers are small and marginal  . 

“This system brings down the cost and makes small loans viable,” said Andrade. 


When the project was initiated the implementation partner faced some challenges that are typical to Indian rural environments – beehives forming on VSAT dishes and playful monkeys changing the orientation of the dish! Farmers also received static shocks on touching the machines as they are barefoot. There were also problems with connectivity. During the monsoon season the notes in the ATM would stick together. 

There were security challenges too, with some incidents of ATM theft.  

However, these were all resolved over time.


HDFC Bank is now planning to take this project to the next level. It is exploring micro ATMs on an Android device. The device will also facilitate loan applications. This will introduce rapid scale for the Bank. Implementing Android devices will introduce more cost reductions, as the processes will be digitised. The Bank is also testing Aadhar Enabled Payment System transactions on the micro ATMs, which will allow for Aadhaar authentication. 

HDFC Bank will also apply the M2M model (dairy system) on the warehouse receipt business that it is currently being piloted. This will allow small farmers to directly sell their produce to organized retailers. 

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