FINANCING OF WAREHOUSE RECEIPTS Advantages of Warehouse Receipt Scheme Shifting of the risk from borrower to the asset Reduction in cost of commodity transactions – loan servicing, supervision costs, etc. Loans not based on individual credibility but on value of the commodity Possible to reduce interest rates due to lower transaction costs No need for physical assets like land, building, etc. to be mortgaged. Immediate access of money to the farmer for his consumption and other needs without resorting to distress sate Better income realisation for the farmers reducing colatility in prices Also provides “buy back” option for home consumption at a later stage Reduction in post-harvest losses due to better storage and hence higher supplies regulated supply of commodity in the market means reducing seasonal price variations even to the consumers

FINANCING OF WAREHOUSE RECEIPTS Similar credit products available internationally Repurchase Agreements – Lender to buy and seller agrees to repurchase the same after a period Export Receivables – Financing against export orders – Payments by importer directly to the lender Factor financing – Financing the supplier against firm orders of the buyer Islamic Trade finance – Purchase by the lender and sells later –sharing of risks by the lender What constitutes Warehouse Receipt Scheme “the use of securely stored goods as loan collateral” The Scheme achieves : Finance for rural farmers, storage of produce in local warehouses, facilitation of sales between the farmer and potential buyers and also provision of key market information through price- discovery mechanisms

FINANCING OF WAREHOUSE RECEIPTS What constitutes Warehouse Receipt Scheme The three basic requirements of the Scheme: Rules and Regulations – Rules and regulations governing insurance, certification, inspection, grades and quality standards to be spelt out Receipts – receipts and contracts to lay down the conditions clearly Storage – secure and efficient storage to be ensured Conditions for lending under the Scheme Eligibility : Farmers, Traders, Rice Millers, Oil Mills, Floor Mills, Exporters and Agro-Industries Financing against receipts issued by Central Warehousing Corporation, State Warehousing Corporations, Warehouses managed & controlled by National Bulk Handling Corporation(NBHC), Warehouses managed & controlled by National Collateral Management Services (NCMSL), and Private Warehouses under specific tie-up with the Bank

FINANCING OF WAREHOUSE RECEIPTS Lending Limits Loan limit based on the existing market prices Margin – 10% to 40% of the value Maximum Loan Rs 10 lakh per borrower Stock value assessed on weekly price trends Maximum loan period 12 months – stocks are to be released within this period and any left out stock not counted for fresh loans What does a warehouse Receipt Contain? Receipt number; Warehouse registration number and date up to which it is valid; Name of the warehouse and its complete postal address; Name and address of the person by whom on whose behalf the goods are deposited; Date of issue of the warehouse receipt; Statement that the goods received shall be delivered to the holder thereof, or that the goods shall be delivered to the order of a named person;

FINANCING OF WAREHOUSE RECEIPTS What does a warehouse Receipt Contain? Rates of storage charges and handling charges; Description of the goods or of the packed containing them with particulars of quality or grad; Market value of the gods at the time of deposit; Name of the insurance company indemnifying for fire, flood, theft, burglary, misappropriation, riots, strikes or terrorism Whether the warehouse receipt is negotiable or non-negotiable Statement of the amount of any advance made and of any liability incurred for which the warehouseman claims his lien Date and signature of the warehouseman or his authorized agent Declared shelf-life of goods; The fact that the warehouseman holds the lien on the goods deposit for his storage and handling charges; and That the receipt would be valid only till the date of expiry of declared shelf-life of the goods for which it is issued.