e-NWRs: Facilitating Quicker, Cheaper Loans

Samir Shah, MD & CEO, NCDEX, believes that the implementation of the Negotiable Warehouse Receipt System would improve the fiduciary trust of the depositors and the banks, increase liquidity in rural areas, lower the cost of financing and ensure better price risk management:

- Samir Shah

Financing agriculture is typically perceived as having high costs of operation, high risks and low returns. Troublesome factors such as uncontrollable and systemic risks, higher costs, unfamiliarity with the sector and trust deficit, have kept commercial banks away from this sector. Agricultural warehousing accounts for around 15% of the warehousing market in India and is estimated to be worth around ₹85 billion. A robust warehousing system has proven to play a catalytic role in agricultural growth (food security) and making finance available to the small and marginal farmers (financial inclusion). The government’s focus on agriculture has ensured that actual disbursements have consistently exceeded annual budget targets, with enhanced allocations year after year. The government has announced several schemes including enhancing agriculture credit flow to the famers. The annual target for agricultural credit in FY2016-17 is ₹9 lakh crore.

According to Samir Shah, MD & CEO, National Commodity & Derivatives Exchange (NCDEX), a large section of this credit is and can be linked to credit taken for post-harvest operations, including marketing functions to hold on to the stock for future price escalation and reduce distress sale.

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