Review of Warehouse Receipt As An Instrument For Financing In India
Dr. Devajit Mahanta
Keywords: Collateral, Commodity, Depositor, Finance, Warehouse Receipt, Exchange, Grades and standards
Abstract:- One of the important aspects of the Indian commodity derivative market is the introduction of warehouse receipts (WRS) as an alternative solution for market participants to access short-term finance. The concepts of the WRS system is based on warehouse receipts which can be used as collateral for accessing finance. The system is made more sophisticated by adopting measures such as grading of commodities according to their quality, rating warehouses according to their size, reputation and integrity etc. In India receipts issued by Central / State Warehouses are accepted as collateral by banks however those issued by private warehouses are not. Since farmers / traders will not deposit their goods with a warehouse whose receipts are not financed by banks viability of the private warehouse is at stake. Hence there is scope for expanding the warehousing infrastructure and also WRS system by making it mandatory for the banks to endorse private WRS.
1) Reserve Bank of India (2005) ‘Report of the working group on warehouse receipts & commodity futures’, Government of India, Mumbai.
2) Coulter, J.P. and Martines. (1998) ‘Brazilian Experience with Grain Warehousing Services and Associated Marketing Tools’, Report for the DFID Crop Post-Harvest Research Programme.
3) Department of Banking Operations and Development (2006-07) ‘Report of the working group on warehouse receipts and commodity futures’, Government of India. [Online] Available: http//indiabudget.nic.in/es2006-07/chapt2007 /chap45.pdf [accessed March 10, 2010]
4) Hollinger, F. and Kiriakov, K. (2009) ‘The Use of Warehouse Receipt Finance in Agriculture in ECA Countries’, Technical background paper for the World Grain Forum 2009, St. Petersburg, Russian Federation, June 6-7, 2009.
5) Ministry of Law, Justice and Company Affairs (1962) ‘Central Warehousing Corporations Act’, Government of India
6) Pal, P. and Wadhwa, D. (2007) ‘Commodity Price Volatility and Special Safeguard Mechanisms’, Economic and Political Weekly, 42 (5), pp 417–27.
7) UNCTAD (2001) ‘Potential applications of structured commodity financing techniques for banks in developing countries’. UNCTAD Paper No UNCTAD/ITCD/COM/31
8) UNCTAD (2009) ‘Report of Warehouse Receipt System and Inventory Credit Initiatives in Eastern & Southern Africa’.
9) Kiriakov, D. (2007) ‘The necessary conditions for an effective warehouse receipts activity’, concept papers for the United States agency for International development, 1300 Pennsylvania Avenue, Washington, October, 2007.
10) Mor, N. and Fernandes, K. (2009) ‘Warehouse Receipt finance for farmers- A glimpse’. Commodity Insights Yearbook, 2009.