Skip to main content

Commodities repositories to be launched next week

Commodities repositories to be launched next week
Finance and trading in negotiable warehouse receipts soon

Trading in negotiable warehouse receipts, a decade-old idea, will be a reality next week, when two repository recordkeeping agencies start operations.

The Warehousing Development and Regulatory Authority (WDRA) has licensed these two repositories. These will keep records of goods stored and moved from regulated warehouses, including warehouse receipt transfers, the same way share transfer records are kept by depositories.

One of the two has been established by the National Commodity and Derivatives Exchange (NCDEX), an agriculture-centric one. The other, CDSL, has been promoted by the BSE. They’re going online when launched next week in Delhi. “We have been working on repository and issue of electronic negotiable warehouse receipts (eNWR) with the respective regulators since long. The move will allow faster financing against such receipts and stocks can be tracked online,” said Samir Shah, managing director (MD) of NCDEX.

Named the National E-Repository, he said it would have 67 per cent NCDEX holding. The National Bank for Agriculture and Rural Development (Nabard) will have 13 per cent stake. State Bank of India and ICICI Bank, the largest government-owned and private one, respectively, would have a little below 10 per cent stake each.

Around  Rs 40,000 crore of financing is happening against collateralised stock. With the e-NWR, this market could expand multifold. At present, with defaults, financiers are finding it difficult to auction stocks and there is also the cost of collateral management fees. With e-NWR, banks may simply sell or transfer such receipts and recover their money.

So far, goods are financed against paper-based warehouse receipts, not fool-proof or fraud-proof. Electronic receipts which can be transferred like negotiable instruments open opportunities for hassle-free and faster trading in commodities. Especially for agricultural commodities, where losses in transit are huge as compared to non-agri ones.

Scaling up will take time, as the warehousing regulator has to ensure a surveillance and enforcement mechanism. By WDRA norms, responsibility for quality and delivery of stock is with the warehouse. However, when these are traded and delivered on an exchange, the latter must guarantee the settlement and compensate a buyer for losses, if any. However, the exchange will be able to then claim compensation by the warehouse.

NCDEX already has a four-tier surveillance mechanism, beginning with the warehousing service provider. Then, the exchange’s logistics team surveillance, the exchange’s surveillance team which reports directly to the MD and by an independent surveillance agency. Over and above, the Securities and Exchange Board of India does random checking of goods in warehouses to match with the record in the exchange concerned.

NCDEX’s monthly delivery on its platform is around 100,000 tonnes a month. It has begun providing RFID tags to all bags of highvalue commodities, such as spices and guar gum.

This allows it to make online checks of any movement of stocks in these commodities in the approved warehouse and against any e-NWR issued against these, against which banks give financing. The coverage is to be extended to all commodities. At present, nine banks and 11 non-bank finance companies are active in collateral financing for agri commodities.

The Business Standard , New Delhi, 19th september 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…