The Hindu Business Line : <I>Warehouse receipt financing, non starter </I>

It was in October 2005 that Indian Bank announced a tie-up with National Collateral Management Services Ltd (NCMSL), for `warehouse receipt financing'.

(NCMSL is a company set up basically to act as a custodian of agricultural commodities. This, the company does by running warehouses and certifying warehouses run by other entities.)

The idea was that the bank would lend to those who keep their commodities at the warehouses, with the commodities as security for the loans.

The arrangement has not yielded results. Confirming this to Business Line, the Chairman and Managing Director of the bank, Dr K.C. Chakrabarty, said the hurdle was that NCMSL was asking for a commission, which made lending unviable.

"It exists," Dr Chakrabarty said, when asked if the tie-up was dead, implying that the possibility of lending to an NCMSL customer was there, provided the bank would get a good rate for its loan.

When the tie-up was announced, Dr Chakrabarty had said that Indian Bank expected to lend about Rs 150 crore under the arrangement. Today, he said that the bank may not have lent "even Rs 5 crore".NCMSL was set up in September 2004 by the National Commodity and Derivative Exchange (NCDEX), the Indian Farmer's Fertiliser Co-operative (IFFCO) and Audit Control and Expertise (ACE) Geneva, with the objective of creating a safe and liquid warehouse receipts market in India.

The company would hire warehouse space, which is available aplenty across the country. Farmers could warehouse their produce, take a `warehouse receipt' from NCMSL and get finance from banks on its basis. Banks, knowing that NCMSL is there to take care of the collateral, would be more comfortable to lend to the farmers.

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