Pledge Finance

In harvesting season there is a huge arrival of particular commodity in the market in very short period, which causes substantial fall in market prices of the commodity. Farmers do not have capacity to hold their stock, so they have to sell their produce at a very meager rate in the market. Under the pledge loan scheme the farmer keeps his produce in the APMC godown and gets 75% of the value as loan. As the prices of the commodity rise in the market the farmer sells his produce in the market and repays his loan and thus fetches higher price for his produce reasonable levels.


Since 1990, the MSAMB has been implementing this scheme of pledge loan for the benefit of farmers of the State. The scheme of pledge loan is available for Moong, Tur, Udid, Soyabean, Paddy, Sunflower Safflower (Kardai) and Gram (Chana). . MSAMB has also covered Jawar, Bajra, Maize, Wheat, Turmeric, Regime (Bedana) and Cashew nuts in this scheme.

Under this scheme, a farmer can store his produce in Godowns of APMC and can immediately get 75% cost of his produce (for Jawar, Bajra, Maize and Wheat 50% or Rs.500/- which is less), at an interest rate of 6%. The APMCs maintain this pledged stock free of cost. The farmers can sell their produce when the prices are higher. The pledge loan limits are sanctioned to APMCs as per their demand.

Under the scheme, the farmer gets agricultural pledge loan at the rate of 6% to an extent of 50 % to 75 % of the value of the produce prevailing in the market. The farmer is allowed to avail this facility up to a period of 180 days. Rebate of 3% on interest is given as promotional incentive to those APMCs who repay within 180 days.If APMS fails to repay within 180 days then APMC cannot avail the incentive rebate of 3%. After 180 days interest rate will be 8% for next 6 months, after that interest rate will be 12% next 6 months.

If APMS fails to repay within 180 days then APMC cannot avail the incentive rebate of 3%. After 180 days interest rate will be 8% for next 6 months, after that interest rate will be 12% next 6 months.

MSAMB has disbursed Rs.1550.77 Cr. Agricultural pledge loan to the farmers of Maharashtra State through APMCs since 1990-91 as a marketing initiative.

Commodity wise loan Limit & Rate of Interest of lone :-
No Commodity Limit of Loan Period Rate of Interest
1 Soyabean, Tur, Moong, Udid, Paddy, Safflower (Kardai) Sunflower, Turmeric and Gram, Jawar, Bajra, Maize & Wheat 75 % of total cost as per market rate. 180 days 6%
2 Cashew nuts 75 % of total cost. (Rs. 50/- per Kg Or Market Rates which is less) 180 days 6%
3 Raisin (Bedana) 50 % of total cost. Or maximum Rs. 50,000/- per Mt. which is less 180 days 6%

The agricultural produce sector has been one of the most important components of Indian economy. Considerable progress has since been achieved in scaling new heights in the production of food grains, commercial crops like cotton, sugarcane, tea etc., fruits, vegetables and milk. The increasing trend of agricultural production has brought, in its wake, new challenges in terms of finding market for the marketed surplus. There is also pressure from all segments of agricultural economy to respond to the challenges and opportunities that the global markets offer in the liberalized trade regime. To benefit the farming community from the new global market access opportunities, the internal agricultural marketing system in the country also needs to be integrated and strengthened. In particular the market system has to be revitalized to a) provide incentives to farmer to produce more; b) convey the changing needs of the consumers to the producers to enable production planning; c) foster true competition among the market players and d) to enhance the share of farmers in the ultimate price of his agricultural produce. Expert Committee on Agricultural Marketing in this context, Government of India in the Ministry of Agriculture appointed an Expert Committee on 19th December, 2000 to review the present system of agricultural marketing in the country and to recommend measures to make the system more efficient and competitive. The Committee in its Report dated 29th June 2001, has suggested various legislative reforms as well as the reorientation of the policies and programs for development and strengthening of agricultural marketing in the country. One of the important recommendations made in the Report is as follows: Credit flow to agricultural sector need to be substantially stepped up to meet increasing demand for capital expenditure for developing marketing infrastructure and for pledge finance. Pledge financing enables the farmers to take advantage of favorable prices and improve their net margin; The Indian farming community consists mostly of small and marginal farmers. Micro level studies indicate that small farm holdings contribute about 54% of marketable surplus and distress sale by these small farmers account for about 50% of the marketable surplus. The farmers often sell their produce to square off their debts soon after harvesting. The solution for this problem lies in providing to them access to safe and scientific storage and easy marketing credit. The strategy should be promotion of pledge financing through a network of rural godowns and negotiable warehousing receipt system.

Pledge Finance Scheme- Circular & Form (Download)

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