Last updated: December 17th, 2019 3:39 PM

SBI Warehouse Receipt Financing

State Bank of India (SBI) has a scheme for financing trader and  owners of goods against warehouse receipts of warehouses managed by MCX/NBHC/NCMSL and Central Warehousing Corporation or State Warehousing Corporation by way of demand Loan or cash credit. SBI is the largest bank in India for SME financing with over 1.3 million SME loan accounts. In this article, we look at the SBI warehouse receipt financing scheme in detail:

Warehouse Receipt Financing

Trader dealing in commodities can avail warehouse receipt financing by pledging goods held by them in warehouses or warehouse receipts. Warehouse receipt is a legal document that provides proof of ownership of commodities (e.g., rolls of steel, cotton) that are stored in a warehouse for safekeeping. Warehouse receipts may be negotiable or non-negotiable. Negotiable warehouse receipts allow transfer of ownership of a commodity without having to deliver the physical commodity.

Type of Financing

The loan can be sanctioned as demand loan or cash credit. In case of demand loan, 75 % of the value of the warehouse receipt, valued at the market value or 80% of the minimum support price declared by State/Central Government, whichever is lower is provided as a loan facility. In case of cash credit facility, 70 % of the value of the warehouse receipt, valued at the market value or 75% of the minimum support price declared by State/Central Government, whichever is lower is provided as loan facility.

Margin for Loan

Margin money must be maintained by the applicant while availing the financing. For demand loan, a minimum of 25% of the value of the warehouse receipt, valued at the market value or Min 20% of the minimum support price declared by State/Central Government, whichever is higher must be maintained. For cash credit facility, 30% (minimum) of the value of the warehouse receipt, valued at the market value or 25% (minimum) of the minimum support price declared by State/Central Government, whichever is higher must be maintained as margin.

Collateral Security

The charge over warehouse receipt marked with lien in favour of the bank must be pledged as primary collateral security. Personal guarantee of partners or directors would be required as collateral security. In addition, comprehensive insurance must be taken on the goods pledge with the insurance cost borne by the warehouse receipt owner.