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Cheap loans for farmers on cards

business Updated: Aug 14, 2011 22:12 IST
HT Correspondent

Banks are likely to lower interest rates for farmers seeking to avail short-term loans, who present storage details of their produce in accredited warehouses.

Backed by the legal status on negotiable warehouse receipts (NWRs) and the growing number of accredited storage centres, banks are now willing to charge lower rates for loans extended against such receipts.

The maximum interests on such loans are expected to come down to 10-11% from the current 11-12%, a government source told HT on the condition of anonymity.

India introduced the NWR system in April 2011, in which farmers can seek loans from the banks against receipts issued to them.

NWRs are the documents issued by the warehouses to the farmers against the commodities stored in the depots.

These receipts are issued by the warehouses registered with the warehousing development and regulatory authority (WDRA) set up as a watchdog for regulation and development of warehouses in India.

That way, a farmer does not need to sell the product immediately to ease cash constraints and the option becomes attractive, if the farmer expects that the seasonal price increase will make it worthwhile to store the product and sell it later.

WDRA has already notified 40 agricultural commodities against which negotiable warehouse receipts could be issued.

Central warehousing corporation (CWC), which runs 473 warehouses, with a total capacity of 10 million tonnes, is pushing for accreditation of its depots to enable farmers to secure loans against NWRs.

“As on August 1, 83 warehouses of CWC with a total capacity of 2.29 lakh tonnes have been registered with the WDRA, which are authorised to issue NWRs,” B B Pattanaik, managing director, CWC told HT.

Most banks have launched special schemes for offering loans against warehouse receipts, State Bank of India (SBI) is offering loans at 8%.

India has total agriculture warehousing capacity of 91 million tonnes at present to store and conserve such large quantities, with state agencies owning 41% of the capacity and the balance distributed among private entrepreneurs, cooperative societies and farmers.