Digital Gateway: New Govt Initiative for Farmer Finance

The government has launched an online digital gateway named “e-Upaja Kisaan Nidhi” to empower farmers with access to pledge finance against their harvested commodities. This initiative enables farmers to store their agricultural produce with the Warehousing Development and Regulatory Authority (WDRA) and secure post-harvest loans from banks.

What is pledge finance?

Pledge finance is a type of loan that is secured by the agricultural produce stored in a warehouse. The farmer can obtain an electronic negotiable warehousing receipt (e-NWR) from the warehouse, which can be used as collateral to access credit from banks. The farmer can repay the loan when the market prices are favourable and sell the produce through the electronic National Agriculture Market (e-NAM) platform.

Pledge finance can help farmers overcome the problem of distress sale, which occurs when they are forced to sell their produce at low prices due to lack of storage facilities or market linkages. Pledge finance can also provide liquidity to farmers for their next crop cycle and reduce their dependence on informal sources of credit.

Benefits of e-Upaja Kisaan Nidhi

The e-Upaja Kisaan Nidhi is a user-friendly digital gateway that simplifies the process of availing pledge finance for farmers. The gateway has been developed jointly by the Department of Food and Public Distribution, the Department of Financial Services, and Nabard. The gateway has the following benefits:

  • It verifies the farmer’s details through an integrated database comprising the Unique Identification Authority of India (UIDAI), the Central Board of Direct Taxes, repositories, and CIBIL scores.
  • It provides information about loans offered by various banks, such as interest rates, tenure, repayment options, and eligibility criteria.
  • It allows farmers to store their produce at any of the approximately 5600 WDRA-registered warehouses across the country and obtain e-NWRs.
  • It enables farmers to access credit at an interest rate of 7 per cent per annum for a period of six months.
  • It facilitates the sale of produce through e-NAM at prices above the minimum support price (MSP).

Growth of pledge finance in India

According to banking sources, in 2022-23, banks disbursed ₹220 crore against paddy, ₹150 crore each against chana (gram) and castor, ₹130 crore against mustard crop, and ₹80 crore against wheat. Sources added that these are all for those who possessed e-NWRs. The pledge financing against crops like soyabean, wheat, guar, and barley is higher in the non-eNWR segment, industry sources said.

In the last few years, there has been a rapid stride in credit availed by farmers and traders by pledging crops as collateral as such transactions reached ₹2,442 crore in 2022-23, up by 66 per cent from the previous year and that was only those who had electronic-Negotiable Warehouse Receipt (e-NWR). The pledge finance to those without e-NWRs was much higher at ₹60,000 crore, according to industry estimates.

The warehouse receipt financing program constitutes a pivotal role in the agri value chain. As of date, the market is at about ₹60,000 crore and is slated to grow at 40 per cent CAGR. It is an important instrument that enhances rural credit and brings in financial inclusion.

Launch of e-Upaja Kisaan Nidhi

The e-Upaja Kisaan Nidhi was launched by Union Minister for Consumer Affairs, Food & Public Distribution, Commerce and Industry, and Textiles, Piyush Goyal, on March 5, 2024, in New Delhi. The minister said that the digital gateway would transform the agriculture sector for a “Viksit Bharat” (Developed India). He also urged the WDRA to waive the security fee for small farmers storing agricultural produce, enabling them to access credit from banks easily.

The launch ceremony was attended by senior officials from the Ministry of Consumer Affairs, Food & Public Distribution, Ministry of Agriculture & Farmers Welfare, Ministry of Finance, Nabard, WDRA, and other stakeholders.

The e-Upaja Kisaan Nidhi is expected to benefit millions of farmers in India who depend on agriculture for their livelihood. The digital gateway is a step towards achieving the vision of doubling farmers’ income by 2024.

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