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Loan against Commodities/Agri Loans

Loan against Commodities/Agri Loans

Commodity Based Financing

Commodity Based Financing (CBF) is a unique product offered by Banks and NBFCs. The basic principle of financing is the underlying asset/ commodity which is being taken as collateral. There is no restriction on location, commodity or quality which is being financed. Financing is available for most of the commodities across the country.

Eligibility:

Any entity dealing in commodities be it farmer, trader, processor, importer, exporter, SME etc is eligible for applying loan against commodities provided they have the underlying commodity meeting the criteria laid down by Banks & NBFCs.

Tenure of the loan

The tenure of the finance may differ commodity to commodity and can be up to a maximum of 12 months.

Margin

The margins varies depending on RBI guidelines, market scenario; volatility in commodity etc. The margin percentage may be changed any time without prior notice at the discretion of the Banks & NBFCs. Generally the margin is 30-40% of the value of the commodity.

Rate of Interest

Commodity Based Financing are generally available at very attractive and competitive interest rates, which are based on the trends prevailing in the market at the time of availing the finance. The interest rate may differ for each commodity based on risk profile or volatility of the underlying commodity and are subject to change any time.

Collateral or Security

The underlying commodity shall be the main collateral asset however as per prudential credit norms, other security documents shall be required. The collateral may differ on case to case basis.

Documents required
  • Application Form
  • Loan Agreement
  • Pledge Agreement
  • Demand Promissory Note (DP note)
  • Other documents based on constituent entity
  • Security Documents as per credit requirement
  • KYC documents
  • Other documents based on constituent entity
  • Security Documents as per credit requirement
  • KYC documents
  • Power of Attorney
Warehouse Receipt Financing

Rural, Micro banking and Agribusiness group caters to the financial needs of those involved in the commodities business, such as farmers, traders, processors and aggregations. A credit line of up to Rs. 300 million is offered for agricultural operations with agricultural commodities as securities, including those maintained in demat form.

Features
  • Limit: Maximum of Rs. 300 million. The limit is assessed on the basis of financial parameters and proof of dealing in commodities
  • Tenure: Maximum of 12 months. The tenure of each tranche varies from 3 to 12 months depending on the commodity financed
Benefits
  • Speedy loan sanction and disbursement with minimum documentation
  • No additional security other than Agricultural commodities
  • Attractive rate of interest
  • Speedy release of commodities after repayment of dues
  • Loans extended in government/private warehouses
Loan Disbursement Process
  • Submit the requisite documents
  • The limit is then set up on the basis of your eligibility
  • Stock the commodity in the designated warehouse and submit warehouse receipts along with disbursement documents to Bank and NBFCs
  • Loan is disbursed after the Bank inspects the stock
Rate of Interest

Maximum Rate of Interest applicable to the facility is I-BASE + 12% plus applicable interest tax or other statutory levy, if any. Final applicable rate is decided by Bank and NBFCs based on various other parameters as per the policy of Bank and NBFCs and will be communicated to the customer upon sanction of loan, subjected to a minimum of I-BASE. Generally the Interest rate range for Commodity Based Finance are as follows (Loan against Warehouse Receipt)

ProductMaximumMinimumMEAN
Farmer14.5010.2011.18
Non Farmer13.009.7511.28

 

  • The range of interest rates provided above is with respect to individual tranche wise loans disbursed during Quarter-II FY16
  • It includes categories like fixed rate, tranche disbursement and customer profile like farmer, village level aggregator, processors, etc.
  • The rate of interest is also based on the customer profile
  • It excludes subsidy and government schemes
  • Mean rate = Sum of rate of all tranche wise loan/ Number of all tranche wise loan
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