Canara Bank to fund stocks in NCMSL warehouses

The National Collateral Management Services Limited (NCMSL) of Mumbai, a company offering risk management solutions in commodities and inventories, has signed a memorandum of understanding (MoU) with Canara Bank which would increase the bank's exposure to the growing commodity trading sector.

Under the MoU, the bank will extend finance against warehoused commodities and inventories under the collateral management structure of NCMSL.

The chairman and managing director, Canara Bank, V P Shetty, said, "The bank is confident that the MoU with CMSL will enable the bank to step up agro-commodity financing the country, at the same time, help farmers during the lean seasons."

Proper control through appropriate risk management will be ensured though the tie-up with the collateral manager, which is expected to transfer the operational risk that would otherwise devolve on the bank.

NCMSL is the first company providing collateral management services in the country and has started operations from December 2004.

A Hari Prasad, managing director and CEO, NCMSL, said, "The company has been set up with the specific objective of putting up a chain of quality warehouses across the country to bring about changes in the commodity storage sector, and thus facilitate commodity financing."

Besides quality assurance, NCMSL is also expected to disseminate information about prices and arrivals, handle infrastructure, and facilitate financing especially to farmers.

Currently there are about 80 independent warehouses under NCMSL, of which three are leased.

The organisation expects to add on roughly 1000 more warehouses in the next three years, of which 200 would be leased and the rest franchised.

NCMSL is also planning to set up testing centres in the next two months in the metros, starting with Mumbai. It will be working with Indian Agricultural Research Institute for mobile testing centres.

NCMSL is promoted by Canara Bank, Bank of India, Corporation Bank, Punjab National Bank, HDFC Bank, Karur Vysya Bank and Yes Bank along with NCDEX, IFFCO, HAFED and ACE, Geneva.