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), Gram (Chana), Jawar, Bajra, Maize, Wheat, Ghewda (Rajma), Turmeric, Regime (Bedana), Cashew nuts and Betel nuts (Supari) 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 at an interest rate of 6%. Farmer can avail the pledge loan facility by storing the produce in the godowns of state Warehousing Corporation or Center Corporation. The APMCs maintain this pledged stock free of cost. The farmers can sell their produce when the prices are higher.

Under the scheme, the farmer gets agricultural pledge loan up to 75 % of the value of the produce prevailing in the market, an interest rate of 6%. 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 APM 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.16986.76 Lacks 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 or MSP which is less.) 180 days 6%
2 Ghewda (Rajma) 75 % of total cost. Or maximum Rs. 3000/- per Quintal (which is less) 180 days 6%
3 Cashew nuts 75 % of total cost. Or Rs. 100/- per Kg (which is less) 180 days 6%
4 Betel nuts (Supari) 75 % of total cost. Or Rs. 100/- per Kg (which is less) 180 days 6%
5 Raisin (Bedana) 75 % of total cost. Or maximum Rs. 7500/- per Quintal (which is less) 180 days 6%

Recently MSAMB has decided to provide pledge loan for Gaggery (Gul) on trial basis. The condition are as 

  • For Gaggery (Gul) Pledge loan limit is 70% of the total cost & loan period limit is 2.5 months.
  • It is binding to APMC to give 50% share for the scheme. MSAMB will Reimburse 50% amount of the loan disbursed to farmer by APMC.
  • It is responsibility of APMC to accept good quality gaggery in the pledge, for that Lab testing of gaggery is mandatory.
  • Relevant APMC should provide suitable cold storage facility for the storage of gaggery.
  • The responsibility of the APMC to insuring necessary insurance policy for stored gaggery in the scheme.

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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