Download PLEDGE FINANCE

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.
• 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
• 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
 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
Private RG owner + Aggregator
Small farmer storing in Private Warehouse
Indian Agricultural Scenario- A perspective
The “Cobweb” syndrome
Bandwagon
effect
Current
price
determines
future crop
choice
Glut in
production
Crash in
prices
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?
• 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?
• 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
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
• 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
Smart work by NEXGEN
Customer happy with Pledge Finance