Warehouse Receipt Loan

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Warehouse Receipt Loan


  • Farmer takes the receipt, which has all the necessary details like quality and quantity of the produce, to the bank. Bank offers credit facility against that receiptup to 70 per cent of the value of the collateral with the warehouse. The farmer can use the fund for his consumption needs and inputs for the next season.A silent revolution is underway in Indian agriculture in the form of warehouse receipt finance. More and more farmers are using warehousing receipts as a tool to meet their working capital and consumption needs after the harvest season.Till recently, the focus of policy makers and lending institutions in India was to extend credit with an intention to boost farm productivity. Of late, the other leg, which is the post harvest credit needs of farmers, has started getting addressed.Post harvest, due to lack of liquidity, a farmer is compelled to sell his produce immediately, sometimes within days of harvest. Due to a supply glut in the market, the farmer is not able to realise the best price for his produce.So, instead of selling, the farmer deposits his produce in a WDRA accredited warehouse, which issues him a warehouse receipt. Farmer takes the receipt, which has all the necessary details like quality and quantity of the produce, to the bank. Bank offers credit facility against that receipt up to 70 per cent of the value of the collateral with the warehouse.The farmer can use the fund for his consumption needs and inputs for the next season. Meanwhile, farmer keeps an eye on the price, and sells the produce, wholly or partly for a price that he thinks is right, and repays the bank. A well developed warehouse receipt finance system includes farmers, banks, financial institutions, insurance companies, commodity exchanges. WRF brings about benefits at both micro and macro level. In fact, the mechanism has the potential to hit many targets with a single dart.