The Warehousing Development and Regulatory Authority (WDRA) under the Department of Food and Public Distribution held a conference on “e-NWR based pledge finance with Regional Rural Banks (RRBs)” here today to create awareness amongst the RRBs about the eco-system of WDRA and benefits of pledge finance through e-NWR.
Shri Dheeraj Sahu, Joint Secretary, WDRA in his welcome address appreciated the unique role of regional rural banks in ensuring institutional credit to agricultural and rural sector in India through its vast network of 21,000+ branches in rural and semi-urban areas. He further highlighted that 70% of the RRB credit flows through the agricultural sector and 64% of their credit is targeted towards weaker sections including small and marginal farmers. Shri Sahu also underlined the commonality of interest between WDRA and RRBs.
Shri T K Manoj Kumar, Chairperson, WDRA requested all the RRBs to onboard with WDRA repositories so that they can start lending through electronic- negotiable warehouse receipts (e-NWR). With the active participation of public sector banks, private sector banks and RRBs, WDRA is trying to improve the post-harvest credit in the country. He further added that RBI has enhanced PSL limit for e-NWRs from Rs. 50 Lakhs to Rs. 75 Lakhs while for other warehouse receipts PSL limit is capped up to Rs. 50 Lakhs only. He also said that banks should be encouraged to extend pledge finance only against e-NWR. WDRA has proactively reached out to banks directly during the last couple of years which has resulted in increasing pledge finance against e-NWR. The Chairperson urged RRBs to enter into MOUs with WDRA to promote pledge finance just as other banks such as SBI, PNB and Federal Bank have done. He further emphasized that WDRA had digitized its operations since 2017 and WDRA’s e-NWR is the first digitized negotiable warehouse receipt in India. He also requested RRBs to be a part of the Digital Gateway being created by WDRA in partnership with NABARD aimed at reducing pledge processing time and improving the ease of doing business.
Shri Mukesh Kumar Jain, Member, WDRA highlighted that RRBs are the lifelines of India’s rural economy. He said that the disproportion between pre and post-harvest finance results into distress sale by farmers and ballooning of NPA in KCC portfolio. RRBs are mandated to lend 75% of total loans and advances under priority sector. The gross NPA in KCC portfolio is quite high in banks including RRBs and if agriculture credit for post-harvest pledge finance is increased through e-NWR then it will help in reducing the NPA in KCC loan drastically. By storing goods in WDRA registered warehouses, farmers can take loans against the e-NWR issued and easily repay their KCC loan. Thereafter, they can sell the produce when prices improve and adjust the pledge loan. This will help in improving farmers’ income also. WDRA has submitted a proposal to the Government of India for formulation of a Credit Guarantee Scheme on e-NWR based pledge finance which will further help in reducing NPAs in KCC portfolio.
Further, Shri Jain stated that post-harvest pledge finance has the potential to go up from Rs. 40 thousand crores to Rs. 5 lac crores. It is seen that many frauds have happened in unregistered warehouses where physical warehouse receipts are given. As a result, banks have suffered huge losses in financing. However, under the WDRA ecosystem, Rs. 8,000/- crores finance has already been extended through WDRA registered warehouses and hardly any major dispute has been reported with respect to quality and quantity by banks. Under modified Interest Subvention (IS) scheme, 1.5% IS is extended to small and marginal farmers having KCC for a further period of up to six months post-harvest of the crop on the produce stored in warehouses registered with WDRA.
Shri Arun Kumar Shrivastava, Member, WDRA highlighted that the produce stored in WDRA registered warehouses has greater security compared with unregistered warehouses. He said that electronic negotiable warehouse receipt is safer compared with paper receipts especially as chances of fraud against paper receipts are very high. e-NWR is a negotiable instrument backed by the WDRA Act 2007. He also outlined the benefits of WDRA registered warehouses including various insurances, periodic inspections, scientific storage with SOP, etc. to safeguard the interest of depositors and bankers. He further said that Govt bodies such as FCI, NAFED and National Horticulture Board have already issued guidelines that Central Pool Stock should be kept in WDRA registered warehouses. Elaborating on the value chain of WDRA registered warehouse eco-system, he said that the direct beneficiaries of the WDRA ecosystem are farmers/warehouseman/ traders and requested RRBs which hold 18% of KCC accounts of farmers to come under WDRA’s ambit to improve post-harvest finance and improve financial health of farmers and the rural sector.
Shri Faiz Ahmed Kidwai, Additional Secretary, Department of Agriculture and Farmers Welfare (DAFW) also graced the occasionsaid that 86 per cent of India’s farmers are small and marginal farmers and they have very limited choice of marketing. Most of them usually sell their produce within the vicinity of their village to the middleman who goes to the Mandi for selling the said produce where too there is often limited choice. Apart from DAFW’s initiative of eNAM, options such as WDRA’s e-NWR can provide choices to farmers. The Department wants to promote post-harvest loaning which is low compared with pre-harvest loaning and wants to ensure that the farmers can hold their produce for 3-4 months when the prices are very low and there is glut in the market. He appreciated that e-NWR based pledge finance is an option for farmers where they can pledge their produce in the WDRA registered warehouse and can get loan against KCC at a very low rate of interest. He said that today the issue was not of production but marketing and that the Department is working with the Farmer Producer Organisations (FPO) to ensure that farmers get better price for their produce. He stated that the WDRA system is designed for better storage, no fraud and with checks and balances so that the farmers can be rest assured after keeping their goods in WDRA registered warehouses. He also spoke about the model APMC Act by which the Department is trying to bring uniformity across the country on marketing loans. The salient feature of the model APMC Act is to recognize the warehouse as Mandi and allow electronic trading through these warehouses such that farmers can keep their stock in the warehouse and get the loan against the said stock in 24-72 hours. Through electronic trading they can be informed about the price of the stock kept in the warehouse and without visiting the warehouse they can sell the stock and settle bank loans. He requested banks including the RRBs to join hands with the Department of Agriculture to promote this eco-system across the country to enhance its present limited outreach and said that with WDRA’s support, farmers would be able to get the remunerative price of their produce.
Ms. N. Neerja, CGM, NABARD said that the farmer is the center of all activities and e-NWR is beneficial for them. The Kisan Credit Card is an innovative step by the Govt. of India which has enabled farmers to get credit that has further enabled improvement in production of food grains. Digitization is significant especially in context of the agricultural value chain. Banks can increase their lending and profits by lending against secure e-NWR especially as Rs. 10 lakh crore is the combined balance sheet of all RRBs.
A video on the activities of WDRA pan-India was screened and a brief presentation was made on the benefits of the WDRA ecosystem. The major issues outlined in the presentation were challenges in agricultural marketing, WDRA’s prime objectives, various benefits of WDRA registration and the functions and role of WDRA in mitigating risks and promoting safe lending through e-NWRs for various stakeholders including RRBs.
WDRA jointly with NABARD is also working on developing a digital gateway for reducing the time and complexity of the present process of extending pledge finance and in this regard a presentation was made. In the said presentation, the objectives, core features, gateway architecture, connectivity and advantages of the proposed gateway were mentioned.
During Open House, the interaction with the participants including Chairpersons of Regional Rural Banks and repositories was lively and enriching. Significant suggestions were made in further improving the overall pledge finance system and enhancing the participation of RRBs in WDRA’s ecosystem. All the RRBs’ Chairpersons presented promised to help increase pledge financing through e-NWRs.
The conference was well-attended by representatives from regional rural banks, public sector banks, Ministries and Govt. bodies working in agriculture/logistics/financing, industry associations, repositories and media personnel.