Arya.ag, India's largest agricultural warehousing business, is using the Avalanche blockchain to tokenize grain deposits, warehouse receipts and loan status, giving lenders what it says is a more reliable way to verify the crops backing agricultural loans.
Nandan Nilekani, the co-founder of tech giant Infosys and project leader of India's Aadhaar identity system, announced the initiative on Thursday at the Global Fintech Festival in Mumbai.
A separate group called Finternet is helping establish the rules for how warehouses and lenders communicate inside the system. Finternet provides digital infrastructure for connecting money and assets globally, which Nilekani proposed along with Agustín Carstens, a former general manager at the Bank for International Settlements and former governor of the Bank of Mexico.
When a farmer stores grain in a warehouse, they can arrange a loan against it instead of selling right away.
At the moment, however, the records showing what's stored, whether it's already been pledged as collateral and how much is still owed often sit in separate systems. That makes it slower and harder for lenders to check everything adds up before approving a loan.
Putting those records on a blockchain — a shared digital ledger that a warehouse, a lender and anyone else with access can check at the same time — instead of each side keeping its own separate paperwork, could help make the process smoother.
The initial focus is on improving the infrastructure behind warehouse-backed lending rather than claiming a specific impact on credit access, with "faster approvals, lower costs or greater access to credit" seen as "potential outcomes to be demonstrated as the system is deployed," according to a statement.
Arya.ag is setting up its own dedicated, layer-1 (L1) blockchain, built using technology from Avalanche, the blockchain network created by Ava Labs. Arya.ag will run the system itself, and plans to open it up to other warehouse companies in the future.
Some of the loans come directly from Arya, through its own non-bank finance company, Arya Dhan. Others come from banks and other financial institutions, which lend against crops stored in Arya's warehouses after using its records to verify what's there and confirm it hasn't already been pledged elsewhere.
The loan documents at the center of all this are called electronic negotiable warehouse receipts, or e-NWRs. These already exist and are legally recognized in India for securing bank loans against stored crops.
“[The] L1 is run by Arya. It’s a dedicated deployment as of now, which will scale to support other warehouse companies as well,” Devika Mittal, head of India at Ava Labs, said in an interview. “To note that even now any bank can join, and three major banks are already joining the L1.”
To put the scale in perspective, Arya.ag holds around $2 billion worth of crops across its warehouses, the announcement shared with CoinDesk said.
In its existing non-blockchain business, Arya.ag facilitates roughly $1.3 billion in loans annually, while Arya Dhan issues about $230 million in loans directly.
The companies didn't say how much has already moved onto the blockchain system, and they haven't given a timeline for when it will scale up. Financial terms of the deal with Ava Labs were not disclosed.
The bigger backdrop here is India's farm credit problem. Farmers make up about 40% of India's population, but only around 15% of them can get formal credit. Most borrowing still happens through informal, often expensive, channels.
Warehouse-backed loans are meant to help close that gap, but haven't been widely used, especially among smaller farmers, even though the legal system to support them already exists.
Arya's initiative is strong evidence of how blockchain technology and tokenization are moving fast beyond being a digital garden for yield-earning financial assets like Treasury notes, and into solving problems at the ground level, from farmers to lenders.