Loan against warehouse receipt
Also called: Warehouse receipt financing, Pledge financing, Cold storage receipt loan · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Class 10, Ch 3 "Money and Credit"
Meaning
A loan against a warehouse receipt is a bank loan secured by the receipt a farmer gets for produce stored in a warehouse or cold storage. The stored crop acts as security. The farmer gets cash soon after harvest, so they do not have to sell at low harvest-time prices (a distress sale). They can wait and sell later when prices are better. Today this works as pledge finance on electronic negotiable warehouse receipts (e-NWRs). A credit guarantee scheme for e-NWR-based pledge financing was introduced in 2024.
Example
In Sonpur, Arun stores his potatoes in cold storage and plans to take a fresh bank loan against the cold-storage receipt (Class 10). He gets cash now and sells the potatoes later at a better price.
Don't confuse with
- Mortgage: this uses immovable property such as land as security. A warehouse receipt loan uses stored produce, which is movable.