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Pledge Finance to Agri Commodities

Pledge Finance to Agri Commodities. PLEDGE. What it is ? Bailment of goods as a security for payment of a debt or performance of a promise. Bailment or transfer of possession Only possession but not the ownership. RESPONSIBILITIES OF PLEDGEE. Must exercise reasonable care.

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Pledge Finance to Agri Commodities

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  1. Pledge Finance to Agri Commodities

  2. PLEDGE What it is ? • Bailment of goods as a security for payment of a debt or performance of a promise. • Bailment or transfer of possession • Only possession but not the ownership

  3. RESPONSIBILITIES OF PLEDGEE • Must exercise reasonable care. • When pledged goods are stolen or robbed -- bank can not be held responsible when exercised reasonable care. • For loss or deterioration -- responsible.

  4. RIGHTS OF PLEDGEE • Right to retain • Right to sell – by giving reasonable notice. • Sale need not be public.it can be private also • Can file a suit.

  5. ESSENTIALS OF PLEDGE FINANCING • Goods / Commodities be stored under bank’s lock & key or in warehouses against warehouse receipts or with clearing agents • Merchandise register & drawing power register to be maintained • Nature of goods, value, perishability, storage facility to be verified • Periodic inspection • Proper insurance • Display of bank’s signboard

  6. But the needs of the following are not met Private RG owner + Aggregator Small farmer storing in Private Warehouse

  7. Indian Agricultural Scenario- A perspective

  8. The “Cobweb” syndrome Bandwagon effect Glut in production Crash in prices Current price determines future crop choice The starting point Poor income realization Prices rise Shortage in earlier crop Change of crop Futures prices would help farmers migrate to demand-led-cropping pattern

  9. WHY THEY NEED PLEDGE FINANCE? • To Prevent distress sale by producers. • To Promote cleaning, drying and grading at farm gate. • To Promote proper storage facilities. • To Facilitate better price realization by farmers. • To Avoid glut conditions in market.

  10. HOW THIS BECAME A BURNING ISSUE? • Due to Gramin Bhandaran Yojana, Cold storage scheme, AMI and the Creation of Huge storage capacities in the private sector ( >150 lakh MT) & GOI’s mission • To prevent distress sale of food grains and other agricultural produce immediately after harvest. • To reduce quantitative and qualitative losses due to storing of food grains in substandard storage. • To reduce pressure on transport system in the post harvest periods of peak supply. • To help the farmers in getting pledge loans against their stored produce to meet immediate financial requirement.

  11. Dilemma of the Conventional Banker Let's go through a Case study

  12. CONTMEPORARY TOOLS FOR APPRAISAL • Access to Time series data on various commodities • Sourcing information from NCDEX,MCX • Keeping in touch with NCMSL and accessing their services • Studying market trends & mark to market on regular basis • Electronic back bone

  13. Collateral Management • National Collateral Management Services Limited promoted by NCDEX • Accreditation of Warehouses - parameter based • Robust grading by reputed agencies • Dematerialization of Warehouse receipts • Bank lending against warehouse receipts • Farmers deposit goods in accredited warehouses • Goods assayed and graded • Finance provided to farmers by banks against warehouse receipt

  14. RESULT Smart work by NEXGEN Customer happy with Pledge Finance

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