Credit guarantee for pledge financing scheme extended to e-NWR (CGS-NPF)

India’s food and consumer affairs minister Pralhad Joshi recently rolled out the Credit Guarantee Scheme for e-NWR-based pledge financing scheme (CGS-NPF) with a fund of Rs 1,000 crore. This scheme seeks to cut on distress selling by farmers by providing post-harvest finance using e-NWRs backed by pledged commodities whose storage is permitted by relevant warehouses. This encompasses small/marginal farmers such as women, farmer’s organizations/ SHGs-SC/ST/PwD farmers, MSMEs, traders, and FPOs. The scheme allows cubing of up to 85% in the case of farmers and up to 75% in other cases. Through this initiative, the lending fraternity has been encouraged to support farmers in post-harvesting capabilities with the resulting impact on farmers’ incomes and positive changes made to their perceptions of the banking system.

Key Highlights

Launch and Objective:

• The Credit Guarantee Scheme for e-NWR-based Pledge Financing (CGS-NPF) was recently rolled out where to Union Minister Pralhad Joshi in the second week of December 2024.

• Purpose: The scheme envisages alleviating distress selling by farmers through the post-harvest credit of one thousand crore against e-NWRs.

• Target Audience: Small and Marginal Farmers, Women, SC/ ST Farmer, Disabled (PwD) Farmer, MSMEs, FPOs and Farmer Cooperatives.

Guarantee Coverage:

• 85% for loans up Rs 3 lakhs for small and marginal farmers, women SC/ST/PwD.

• 80% coverage for loans above Rs. 3 lakh but less than Rs. 75 lakh to the same above group.

• 50% guarantee for loans up to Rs. 200 lakh for other borrowers, which includes the MSMEs traders etc.

Features:

• Total Corpus: Rs. 1,000 Crore.

• Eligible Institutions: The two major classifications for bank are Scheduled Banks and Cooperative Banks.

• Risks Covered: Credit risk associated with the receivables and risk associated with the warehouseman.

• Guarantee Fee: 0.4% for farmers, 1% for non-farmers.

Financial Implications:

• Initially, the 80-85 % guarantee will be provided on those loans that have been given up to Rs. 75 lakh to the farmers.

• 75 percent will be covered up to Rs.200 lakh for the loans given to MSMEs, traders and FPOs.

Government’s Commitment:

• Minister Joshi said that this scheme is viable for food security and called for banks to become less conservative in funding farmers.

• The scheme sits well with Prime Minister Mr. Modi’s agriculturist-friendly profile.

• The platform called e-Kisan Upaj Nidhi works on bringing tailor-made lending methods targeting farmers without their frequent trips to the bankers.

Claims Settlement:

• Loans up to Rs. 75 lakh: The first installment constitutes to 75% of the total sum of the contract while the second installment is only 25% of the total sum of the contract.

• Loans above Rs. 75 lakh and up to Rs. 2 crore: One payment is equal to 60% of the cash and another payment corresponds to 40% of the cash.

Additional Goals:

• Increase Warehouse Registration: It leads registered warehousing to 40,000 as the government initiates in the next 1-2 years.

• Focus on Farmers’ Welfare: The plan is aimed at increasing working capital in post-harvest sectors, for the farmers and traders, and improving relations between the banks and the borrowers.

Conclusion

Credit Guarantee Scheme for e-NWR-based Pledge Financing is a critical initiative aimed at solving farmers' post-harvest financial challenges. With ₹1,000 crore as corpus, it ensures accessible loans, reduces distress selling, and supports small/marginal farmers, MSMEs, and FPOs. This scheme strengthens warehousing infrastructure, builds trust in banks, and aligns with the government’s commitment to rural development and food security.