Credit scheme launched to help producers

Farmers and traders will now be able to obtain finance against warehouse receipts under a scheme introduced by Punjab National Bank (PNB) in collaboration with the National Multi-Commodity Exchange of India Limited (NMCE) and Central Warehousing Corporation (CWC).

"A farmer or a trader can get loans for non-perishable agricultural and other commodities from Rs 50,000 to Rs 1 crore, with a margin of 20 per cent to 40 per cent, valuation of which is to be arrived at on the basis of market value , invoice value or minimum support price fixed by the government, whichever is lower," Kailash Gupta, managing director, NMCE, told  Business Standard.

PNB has authorised its four branches at New Delhi, Kottayam, Kochi and Kozhikode to extend demand loans to farmers and traders on presentation of CWC negotiable warehouse receipts certifying the quantity, quality and location of the commodity stored in CWC warehouses, along with relevant forward sales contracts of participants with the members and brokers of NMCE.

The commodities covered include cardamom, pepper, rubber, jute and jute products.

The banks prime landing rate (BPLR) will be applicable for loans upto Rs 2 lakh and one per cent will be added if the loan exceeded Rs 2 lakh.

Under the scheme, the demand loan shall be sanctioned for a period not exceeding six months or the validity of the pledged warehouse receipt, whichever is earlier.

According to the scheme, a farmer or trader shall deposit the agricultural and other commodities with CWC and obtain a warehouse receipt, which certifies the quantity and quality of the deposited commodity.

The farmer or trader thereafter shall enter into forward sales contract with NMCE's member and broker, who in turn will place the client order form in his terminal in NMCE's computer system.

NMCE after verifying the validity of warehouse receipt, will allocate a separate client identification number to the farmer or trader, if he wants to avail finance from PNB.

Upon receiving the brokers order incorporating the client identification number, NMCE will create an order identification with time stamp, and trade will be executed on matching with the opposite order, which will be treated as a forward sale contract.

Printed from the member's computer, the forward sales contract will be given to the seller (farmer or trader), who along with the warehouse receipt can approach the PNB branch for the loan.

"This move will be a boon to farmers and growers who often rush to private money lenders to obtain finance against their produce and pay exorbitant rate of interest and run into indebtedness. It will also provide greater impetus to farmers and traders to trade on NMCE, whose delivery is backed by sound and reliable warehouse receipt system, which has led to efficient clearing and settlement," said Gupta.

PNB and CWC are the promoters of NCME along with other institutions like National Agricultural Co-operative Marketing Federation of India (NAFED), Gujarat Agro Industries Corporation (GAIC), National Institute of Agricultural Marketing (NIAM), Gujarat State Agricultural Marketing Board (GSAMB) and Neptune Overseas Limited amongst others.

The central government has decided to double farm credit from banks in the next three years from Rs 80,000 crore in in 2003-04 to over Rs 1,60,000 crore. Nationalised banks were keen to enhance farm credit by over 30 per cent over last year.