Issues Limiting the Progress in Negotiable Warehouse Receipt (NWR) Financing in India§

Abstract

Although the warehouse receipt system (WRS) has the potential to improve the access to institutional credit of farming community, specially the smallholders lacking acceptable collateral for availing loan from formal channels, the progress of loan against NWR is observed to be slow. The paper has analysed the issues responsible for limited popularity of pledge finance amongst farmers. The agencies having integration with the market like the collateral management service providers, APMCs, Agricultural Marketing Board, etc., have been found to be a better window for disbursement of pledge finance. The physical availability of warehouses, complicated procedure and poor awareness level are some of the factors that limit the use of loan against a negotiable warehouse receipt (NWR). Awareness about advantages of NWR loans needs to be generated by involving banks, Krishi Vigyan Kendras, State Agricultural Marketing Boards, Regulated Market Committees, NGOs, co-operatives, FPOs and even APMCs. In order to inculcate storage habit and promote storage among the producers, warehousing should be encouraged under public-private partnership mode. There is a strong need to push NWR beyond a negotiable instrument as it offers immense potential to trade, short-term loan to farmers, balanced supply of agri-commodities and enhances farmers returns.