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Pledge Finance to Agri Commodities. PLEDGE. What it is ? Bailment of goods as a security for payment of a debt or performance of a promise. Bailment or transfer of possession Only possession but not the ownership. RESPONSIBILITIES OF PLEDGEE. Must exercise reasonable care.

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Presentation Transcript

Pledge Finance

to

Agri Commodities


Pledge
PLEDGE

What it is ?

  • Bailment of goods as a security for payment of a debt or performance of a promise.

  • Bailment or transfer of possession

  • Only possession but not the ownership


Responsibilities of pledgee
RESPONSIBILITIES OF PLEDGEE

  • Must exercise reasonable care.

  • When pledged goods are stolen or robbed -- bank can not be held responsible when exercised reasonable care.

  • For loss or deterioration -- responsible.


Rights of pledgee
RIGHTS OF PLEDGEE

  • Right to retain

  • Right to sell – by giving reasonable notice.

  • Sale need not be public.it can be private also

  • Can file a suit.


Essentials of pledge financing
ESSENTIALS OF PLEDGE FINANCING

  • Goods / Commodities be stored under bank’s lock & key or in warehouses against warehouse receipts or with clearing agents

  • Merchandise register & drawing power register to be maintained

  • Nature of goods, value, perishability, storage facility to be verified

  • Periodic inspection

  • Proper insurance

  • Display of bank’s signboard


But the needs of the following are not met
But the needs of the following are not met

Private RG owner + Aggregator

Small farmer storing in Private Warehouse



The cobweb syndrome
The “Cobweb” syndrome

Bandwagon effect

Glut in production

Crash in prices

Current price determines future crop choice

The starting point

Poor income realization

Prices rise

Shortage in earlier crop

Change of crop

Futures prices would help farmers migrate to demand-led-cropping pattern


Why they need pledge finance
WHY THEY NEED PLEDGE FINANCE?

  • To Prevent distress sale by producers.

  • To Promote cleaning, drying and grading at farm gate.

  • To Promote proper storage facilities.

  • To Facilitate better price realization by farmers.

  • To Avoid glut conditions in market.


How this became a burning issue
HOW THIS BECAME A BURNING ISSUE?

  • Due to Gramin Bhandaran Yojana, Cold storage scheme, AMI and the Creation of Huge storage capacities in the private sector ( >150 lakh MT)

    &

    GOI’s mission

  • To prevent distress sale of food grains and other agricultural produce immediately after harvest.

  • To reduce quantitative and qualitative losses due to storing of food grains in substandard storage.

  • To reduce pressure on transport system in the post harvest periods of peak supply.

  • To help the farmers in getting pledge loans against their stored produce to meet immediate financial requirement.


Dilemma of the conventional banker

Dilemma of the Conventional Banker

Let's go through a

Case study


Contmeporary tools for appraisal
CONTMEPORARY TOOLS FOR APPRAISAL

  • Access to Time series data on various commodities

  • Sourcing information from NCDEX,MCX

  • Keeping in touch with NCMSL and accessing their services

  • Studying market trends & mark to market on regular basis

  • Electronic back bone


Collateral management
Collateral Management

  • National Collateral Management Services Limited promoted by NCDEX

  • Accreditation of Warehouses - parameter based

  • Robust grading by reputed agencies

  • Dematerialization of Warehouse receipts

  • Bank lending against warehouse receipts

    • Farmers deposit goods in accredited warehouses

    • Goods assayed and graded

    • Finance provided to farmers by banks against warehouse receipt


Result

RESULT

Smart work by NEXGEN

Customer happy with Pledge Finance


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