Credit Guarantee Scheme for e NWR Empowering Farmers with Financial Security Upsc Current Affairs

Why in the News?

The Union Ministry of Consumer Affairs, Food and Public Distribution has launched the Credit Guarantee Scheme for e-NWR based Pledge Financing (CGS-NPF), aimed at enhancing post-harvest financial security for farmers.

About Credit Guarantee Scheme for e-NWR

• Vision: To provide a corpus of ₹1,000 crore for post-harvest finance to farmers, enabling them to avail loans by pledging their agricultural produce stored in accredited warehouses.
• Objective: To minimize distress selling by farmers and encourage post-harvest lending against electronic negotiable warehouse receipts (e-NWRs). The scheme also aims to strengthen trust among farmers, traders, and the banking sector by covering both credit and warehouse risks.

Key Provisions of the Scheme

• Corpus and Coverage: A total corpus of Rs. 1,000 crore to cover loans up to Rs. 75 lakh for agricultural purposes and Rs. 200 lakh for non-agricultural purposes.
• Eligible Borrowers: Small and marginal farmers, women, SC/ST/PwD farmers, MSMEs, FPOs, and farmer cooperatives.
• Guarantee Coverage:
  • 85% coverage for loans up to Rs. 3 lakh.
  • 80% coverage for loans between Rs. 3 lakh and Rs. 75 lakh for small and marginalized farmers.
  • 75% coverage for MSMEs, FPOs, and traders.
• Guarantee Fee: Set at 0.4% per annum for farmers and 1% per annum for non-farmers.
• Eligible Institutions: All scheduled banks and cooperative banks.

Expected Benefits of the Scheme

• Reduced Distress Selling: Facilitates easier access to credit, preventing farmers from selling at distress prices during harvest.
• Boost to Post-Harvest Lending: Anticipated increase in post-harvest lending to Rs. 5.5 lakh crore over the next decade.
• Financial Inclusion: Focuses on underserved groups, promoting greater financial inclusion.
• Improved Trust: Enhances the confidence of banks in lending to farmers by mitigating credit and warehouse risks.

Understanding e-NWR

An electronic Negotiable Warehouse Receipt (e-NWR) is a digital version of a traditional warehouse receipt, enabling the holder to claim or transfer ownership of stored goods.

Mechanism:

• Issued by registered warehouses regulated by the Warehousing Development and Regulatory Authority (WDRA).
• Can be traded or used to secure loans without physical handling of goods.

Benefits:

1. Transparency: Real-time, centralized online records improve traceability and accountability.
2. Access to Markets: Enables farmers and FPOs to connect with a wider network of buyers.
3. Bargaining Power: Helps farmers and FPOs secure better prices for their produce.
4. Loan Facilitation: Banks accept e-NWRs as collateral, simplifying loan access.

About WDRA

The Warehousing Development and Regulatory Authority (WDRA) is a statutory body established under the Warehousing (Development and Regulation) Act, 2007.

Role:

• Implementation of the Negotiable Warehouse Receipt (NWR) system.
• Regulation and development of warehouses.

Goals:

• Ensure safety and quality of stored agricultural products.
• Promote scientific storage practices.

Impact on Farmers:

• Enables safe storage of produce.
• Facilitates access to credit through warehouse receipts, improving financial stability.