Loans against Warehouse Receipt

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Loans against Warehouse Receipt
Loans against Warehouse Receipt of Cold Storage Units/ Private Warehouses/ Godowns
Features
Purpose : The following forms of financing against Warehouse Receipts are being done by us
Eligibility :
  1. Each cold storage/private warehouse will be treated as one unit.
  2. The credit worthiness/track record of cold storage owner and private warehouse owner including farmer borrower/small traders with the branch are to be satisfied.
  3. The owner of the cold storage/private warehouse to extend collateral security against the prudential limit as the farmer borrower/small traders are sponsored and guaranteed by him.
Produce Market loans : To those farmers who have availed crop loans from the bank for raising the concerned crop in that season. (Refer to the guidelines to be followed for this product furnished elsewhere in this booklet)

Financing against warehouse receipts issued by State/Central Warehouses:

: When the commodity is stored in State/Central Warehouses.

Financing against Warehouse Receipts issued by Private Warehouses / Godowns / ColdStorages:

:

When the commodity is stored in private warehouses/ godowns/ cold storages that are financed/not financed by us.

Financing against warehouse receipts issued by National Bulk Handling Corporation Limited: (terms & conditions, procedure, documentation etc. are furnished separately for the loans against the WHR of NBHCL)

:

When the commodity is stored at NBHCL leased or NBHCL franchised private warehouses/ godowns/ cold storages that are financed/not financed by us.

Loan limit »

Loan to the extent of 65% to 80% of the market value of the produce or the value at the procurement price (minimum support price) declared by the respective State Governments, whichever is lower, may be sanctioned subject to a maximum limit of `10 lacs per farmeron pledge /hypothecation of agricultural produce (including cold storage / warehouse receipts) for a period not exceeding 12 months.

As and when the PML is sanctioned as Demand Loan, the outstanding dues in the existing Agricultural cash credit account of the borrower must be fully recovered by debit to this loan account and excess amount, if any, released to the borrower

The terms of sanction of Produce Market Loans to farmers are as under.

Type of borrower Terms of sanction »

Type of borrower
:
Terms of sanction
Farmers who have not availed crop loan from any bank :
  1. Loans will be sanctioned on the terms stipulated for Agrl. Produce Marketing Loan.
  2. An undertaking will be obtained from the prospective borrowerthat the produce kept in the warehouse and offered as securityto the Bank is free from any encumbrance/charge. (Dulydischarged warehouse receipt will constitute the security to the advance, subject to the borrower completing our usual formalities relating to sanction of the advance).
Farmerswho have availed crop loan from other banks :
  1. Loans will be sanctioned on the terms stipulated for Agri. Produce Marketing Loan.
  2. Loans will be sanctioned after ascertaining the crop loan account balance from the lending bank. The applicant has to submit declaration to this effect.
  3. The dues of other bank will be remitted directly from the loan sanctioned. (Duly discharged warehouse receipt will constitute the security to the advance, subject to the borrower completing our usual formalities relating to sanction of the advance).
Exposure Cap:

  1. Maximum exposure cap per warehouse (godown) or cold storage continues to be `5.00 crore. However, branch need not obtain additional security from the warehouse/cold storage owner. There is no such exposure cap for warehouses of Central Warehousing Corporation (CWC) and State Warehousing Corporations (SWCs).
  2. Within the maximum exposure cap of Rs 5.00 crore, coverage of storage capacity of the godown/cold storage by our branches for financing warehouse receipts issued by the owner will be as under: (Cir. Agr/2006-07/23 Dt. 10.10.06)

Construction of godown/coldstorage financed byour Bank.

:

Upto100% storage capacity of godown/cold storage capacity can be covered by us.

Construction of godown/cold storage financed by other Bank. : Only 75% storage capacity of godown/cold storage can be covered by us.

Period of Loan »

12 months
Period of Loan : .
Security : (applicable to the farmers availing produce market loans)

Primary : Pledge of warehouse receipt.
Collateral : NIL (Upto maximum limit of Rs 10.00 lacs per farmer)

Rateof interest : 8% p.a. fixed (i.e. 5% below BPLR) for business booked during theperiod 12.03.2009 to 31.05.2009.This interest rte will be valid for one year, from the date of disbursement. After 31.05.2009, normal interest rates i.e. 3% below the BPLR (effective rate @10%) as advised vide Cir.No.AGR/2008-09/53 Dt. 03.02.2009 are applicable.

Applicable Ledger folio charges, inspection charges and processing fee are to be recovered as usual.

Insurance: While sanctioning Produce Market Loans against warehouse receipts, branches are advised to ensure that the warehouse and stocks stored therein are insured against all possible risks.

Margin : The margin for the produce market loans varies from 20% to 35% as under:

Category
:
Margin
Advances against warehouse receipts issued by Central Warehousing Corporation, State Warehousing Corporation :

20% – 6 months repayment period.
30% – 12 months repayment period.

Based on –

  1. price generally obtaining at the time of harvesting of the commodity in the current year and
  2. current market price whichever is lower of (i) & (ii)
Advances against private warehouses :

25% – 6 months repayment period.
35% – 12 months repayment period.

Based on -

  1. price generally obtaining at the time of harvesting of the commodity in the current year &
  2. current market price whichever is lower of (i) & (ii)

The Branch should be vigilant and should ensure that sufficient margin is maintained for the advance. In case the prices of commodities move more than 10% in unfavourable direction and the customer is unable to provide necessary margins, the branch is required to initiate action by liquidating the loan in consultation with the warehouse owner.

Other guidelines »

  1. Head Office Credit Committee (HOCC) (HOCC-I, HOCC-II or HOCC-III/ZOCC) will accord approval (exposure ceiling per private cold storage / warehouse) on case to case basis.
  2. Individual limits will be decided based on, inter alia, capacity of the warehouse/ cold storage, average value of goods, local demand and opinion report compiled.
  3. The approval will be granted for one year subject to renewal annually.
  4. Branch will compile a detailed opinion report on the warehouse owner before recommending for an exposure limit and the report will be updated at the time of renewal.
  5. The opinion report will contain, inter alia, the branch comments on the condition of the warehouse for which yearly inspection will be carried out by the branch.
  6. Warehouse should possess valid license issued by the appropriate Govt. authority.
  7. Proper KYC norms are to be applied to the authorized individual who signs warehouse receipt. Specimen signature and KYC norms of person authorized to sign warehouse receipts to be kept on Bank record. This aspect should be scrutinized with more than ordinary care in respect of those warehouses where other Banks have financed for construction.
  8. KYC norms should be applied to farmers availing loans. To ensure against traders disguised as farmers, photo copy of pattadar passbook or certificate from revenue authority to prove validity of farmer’s land holding must be enclosed to the loan documents. Further, quantity of goods covered in the warehouse receipt should be proportionate with the land holding of the farmer.
  9. An authorized official from branch should visit the warehouse at regular intervals to verify the authenticity of the Warehouse receipt and quality/quantity of stored commodities.
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