Financial Daily from THE HINDU group of publications
Saturday, Feb 07, 2004
Agri-Biz & Commodities
Money & Banking - Farm credit
NMCE ties up with HDFC Bank for warehouse receipts
Mumbai , Feb. 6
QUIXOTIC Quotes, the Srinagar terminal of the National Multi Commodity Exchange of India (NMCE), will use HDFC Bank's new loan products for warehouse receipts.
The bank will be extending finance up to Rs 50 lakh against rubber and pepper receipts.
Mr Kailash Gupta, Managing Director of NMCE, said: "The move to introduce this revolutionary product by HDFC Bank will have far-reaching implications on commodity trading in the country. We expect volumes on NMCE to rise exponentially."
The move to introduce the warehouse receipt-based loan product stemmed largely from the credibility that its lead promoter Central Warehousing Corporation enjoys, he said.
Quixotic Quotes, which has pioneered stock-broking in the Kashmir Valley, and is also providing training to students in stock market operations, belongs to a well-known construction and trading group in Jammu & Kashmir.
Quixotic Quotes buys short delivery contracts and simultaneously sells forward delivery contracts, which is called swap or spread. The spread between the short and forward is approx 3.5 per cent to 4 per cent per month in rubber and approx 2 per cent per month in black pepper on NMCE.
The yields are achieved by investing in CWC warehouse receipts of rubber and pepper where risk of quality, shortage in weight and lack of scientific preservation in storage is taken care of by CWC.
The original depositors endorse the Warehouse Receipts in favour of the transferees, who enjoy the same rights that the original depositors had in the warehouse receipt. The price risk is covered by forward sales simultaneously.
This way the entire credit risk is eliminated, enabling HDFC Bank to come out with a product for enhancing institutional/bank credit to the commodity sector against CWC warehouse receipt.
Alankit Imaginations Ltd, a leading NMCE member from New Delhi, the clearing member for Quixotic Quotes, has over 150 terminals, 31 NSE VSATs, two BSE VSATs and nine VSATs of NMCE operating in North India.
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