NBHC eyes funding of Rs 5,000 crore

National Bulk Handling Corporation (NBHC), the Financial Technologies-promoted collateral manager, is planning to tie up Rs 5,000 crore funding from major public and private commercial banks by the end of the current financial year.

The country's largest collateral manager has clocked funding to the tune of Rs 1,700 crore till the end of August 2007 compared with Rs 100 crore mopped up during the year-ago period.

"We are confident of achieving many milestones in the ensuing kharif season with phenomenal growth and confidence in commodity markets," said Anil Choudhary, managing director of NBHC.

"Till August 2006, we had singed MoUs with only two banks, which have gone up to 13 as of now. It's a tremendous success for us," he added.

According to Choudhary, banks have reduced margins on agriculture lending to 25-30 per cent from 50 per cent 3 years ago as default rates have come down dramatically. "With our qualitative support and robust commodity management practices, we are targeting to reduce the margins to 15 per cent in the next two years," he added.

The delivery arm of the Multi Commodity Exchange (MCX) offers total enterprise resource planning (ERP) solutions to banks and big corporates, who tie up with it for commodity management.

The future for the collateral manager is bright, with the government emphasising on food security and better food management. Mishandling of foodgrains remains a great challenge not only for the government, but also for procurement agencies.

According to an estimate, proper handling of foodgrains can feed 11 crore people throughout the year.

"In addition to proper policy planning, mishandling of commodities and poor infrastructure are some of the challenges we are facing today that need to be addressed instantly," said Choudhary.

NBHC currently operates in 700 locations in 17 states, handling 1,500 warehouses across the country. It is now targeting to reach every taluk in the remotest area. The warehouse receipts issued by the company range from Rs 9,000 to Rs 7.7 crore.

Choudhary added that farmers had gained a lot through efficient collateral management as banks had reduced lending rates. Banks currently offered loans about 2-3 per cent below the prime landing rate (PLR) against 2-3 per cent above the PLR three years ago because their margins remained intact when they lent to farmers through a collateral manager.

"Farmers are going to be the biggest beneficiaries of our collateral management services in the times to come as they will get easier liquidity against their produce at a rate of interest which is quite competitive. They can also wait for remunerative prices to sell their produce," said Choudhary.

According to an estimate, the post-harvest credit is currently minuscule in comparison to the total lending of around Rs 250,000 crore. The scenario is set to change once warehouse receipts become a negotiable instrument, enabling farmers to avail of loans against the instrument.