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Tuesday, January 18, 2022

Government asks banks to lend only on negotiable warehouse receipts

The government may have backtracked on agricultural laws but it has begun taking small steps for formalisation of the sector.

It has nudged banks to finance warehouses only against negotiable warehouse receipts (NWRs) and electronic-NWRs, a move aimed at getting more warehouses in the ambit of formal finance.

“At present only 10% of the warehouses in the country are registered because banks are continuing to extend pledge finance against local warehouses receipts or storage receipts,” a government official aware of the deliberations said on condition of anonymity.

That is why it has been suggested to banks that they finance only against e-NWRs, the official said. “This will encourage more warehouses to seek WDRA (Warehouse Development Regulatory Authority) registration and help in rapid development of the warehousing ecosystem.”

Both farmers and businesses can store their produce in WDRA-registered warehouses and seek loans from banks against them. Earlier this year, the Reserve Bank of India had increased the loan limits for bank lending against NWRs and e-NWRs to ₹70 lakh from ₹50 lakh per borrower. It had said that this will ensure greater flow of credit to the farmers against pledge or hypothecation of agricultural produce and encourage use of NWRs and e-NWRs issued by regulated warehouses as a preferred instrument for availing such finance by farmers.

The regulator, however, did not increase the limit for non-NWR and e-NWR warehouse receipts.

A senior bank executive said the issue was also discussed in a recent meeting between banks and officials of different ministries, including consumer affairs. “It was decided that banks will gradually move towards financing only e-NWRs, and that a year-long period should be given so that the present system is not disrupted and warehouses get enough time for upgrading and registering their facilities to WDRA standards,” he said.

In the past three years, the government has sanctioned 1,550 warehouses under various schemes. In reply to a question in the Lok Sabha, agriculture minister Narendra Tomar had stated that capacity of cold storages is 37.83 million metric tonnes and that of warehouses is 173.65 million MT. “Government is implementing various schemes to develop the cold storage and warehouse facilities,” he had said, noting that in addition to conventional godowns, construction of steel silos has been undertaken from 2016 for modernising the storage infrastructure and improving shelf life of stored food grains.

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Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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