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Questions

1. What is warehouse receipt (WHR)?Ans: According to the Warehouse (Development and Regulation) Act, 2007, "warehouse

receipt" means an acknowledgement in writing or in electronic form issued by a warehouseman

or his duly authorised representative (including depository by whatever name called) of the

receipt for storage of goods not owned by the warehouseman. A WHR is either negotiable or

non- negotiable i.e. the title can be either endorsed to someone else (negotiable) or its title cant

be transferred (non - negotiable). The ability to be sold or transferred to another party as a form

of payment is used to define the term negotiable. Something which is negotiable is transferable

by endorsement and delivery.

2. Where WHR can be availed?Ans: WHR can be availed at any warehouse. Any company or person can issue a WHR which is

negotiable provided it is registered under the Warehouse (Development and Regulation) Act,

2007. Any company or person which doesnt want to issue any negotiable WHR need not be

registered in this act.

3. Commodities under WHR.Ans: Commodities under WHR vary from bank to bank and warehouse facility to warehouse

facility. Banks provide financing to WHR for which the

4. Margins of the banks in WHR.Ans: Generally margins differ from bank to bank based on the commoditys characteristics i.e.

its quality, moisture content, perishability, etc. It is generally 25% - 40% of the commodity price

declared by the Collateral Manager (CM).

5. Collaterals for WHR.Ans: Working capital finance can be either cash credit or pledge. The cash credit facility is

basically an overdraft facility where the primary collateral is the stocks in the warehouse but

there is secondary collateral also like mortgaging of land or house. But in case of pledging, theprimary collateral is stocks in the warehouse but there is no provision for secondary collateral.

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6. Procedure for sanction of a loan and tenure of the loan.Ans: Procedure:

Tenure: For cash credit the tenure of the loan is 12 months.

For pledge, the tenure of the loan is 11 months.

7. Disbursement of the loan amount.Ans: After all the required documents are submitted and all the formalities are fulfilled the banks

disburse the loan amount to the loanee after deducting the margin, insurance and processing fees.

8. Documents required for disbursement.Ans:

y Address proofy Photo ID (KYC mandated by RBI)y Authorisation (CM issues WHR appointed by the bank)y Banking facilities other than the current bank in context.

9. Servicing of the loan.Ans: After disbursement of the loan, the bank ensures that the loan is ustilised as per the

intention of the loan for which it was taken.

Farmers

Collateral

Manager

Bank

y Quality checky Quantity checky Price declarationy Generate WH

receipt

Warehouse

Or

Godowns

Apply for loan (CC or Pledge) Bank

appoint

Collateral

ManagerLoan

disbu

rsement:y Marginsy Insurancey Processing

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10.Closure of the loan at the end of season.Ans: After the loan has been repaid, the account of the loan is closed.

11.Risks involved in the loan.Ans: There are many risks involved in the WHR financing. Some of them being fraud, nexus

between the CM and the client, the absence of sub-lease clause in the contract, presence of sub

sub lease which cannot be enforced in the court of law, perishability of the commodity stored,

moisture content of the commodity, etc.