ICICI Bank to expand warehouse receipts business

Warehouse receipts financing is a commodities-based financial instrument which can bring more interest revenue to the financiers. This instrument will give farmers the option of holding back their produce if the prices are low. They can also get up to 80 per cent funding of the value of their produce from the banks.

A warehouse receipt is guaranteeing the existence and availability of a given quantity and quality of a commodity in storage for safekeeping, which is often used in cash and futures transactions.

The interest rates the banks charge vary between 8 per cent and 10 per cent, lower than bank prime lending rates. For loans up to Rs 50,000, the interest rates are at least two percentage points below the PLR. For loans up to Rs 200,000, the rates are either marginally below the prime rate, or equal to it.

Confirming , ICICI's move, Kailash Gupta, chairman and managing director, NMCE said: "ICICI Bank has approached us with a proposal to introduce warehouse receipts based finance to our traders. Talks are on. No decision has been taken so far."

It seems NMCE's strong network with the warehouses under the Central Warehousing Corporation (CWC) is the reason behind ICICI Bank's move. The exchange has an access to all the 491 CWC warehouses in India. In last two years, the CWC has employed and trained people to check quality norms and standard storage practices for a range of commodities, apart from foodgrains.

The CWC also has a 50 per cent partnership with the state warehouses, which access NMCE services. The warehouseman assesses the quality of goods tendered and checks its specifications. He certifies this on the warehouse receipt.