Credit Guarantee Scheme (CGS-NPF): Post-Harvest Loans for Farmers; Features, Benefits, and How to Access Them

The Indian agricultural sector has always been the backbone of the economy, contributing 17.7% to the Gross Value Added (GVA) in FY 2024 and employing nearly half the population. Recognizing the importance of this sector, the government has introduced several initiatives to ensure farmers' financial security and improve their livelihoods. Among these, the Credit Guarantee Scheme for e-NWR Based Pledge Financing (CGS-NPF), launched on 16 December 2024, is a transformative step toward empowering farmers.

What is the CGS-NPF Scheme?

The CGS-NPF scheme is designed to enhance post-harvest financing for farmers by leveraging electronic negotiable warehouse receipts (e-NWRs). With a Rs 1,000-crore corpus, it allows farmers to access institutional credit by pledging their produce stored in Warehousing Development and Regulatory Authority (WDRA) accredited warehouses. This initiative minimizes distress sales, providing farmers with the financial stability to wait for better market prices.

The scheme has garnered significant interest from stakeholders, particularly in the banking sector, due to its ability to enhance post-harvest lending through e-NWRs. By facilitating institutional credit access, the scheme aims to enhance farmers' incomes and reduce financial barriers. Designed with inclusivity in mind, the scheme provides significant benefits to small and marginal farmers, women, Scheduled Castes (SC), Scheduled Tribes (ST), and Divyangjan (PwD) farmers at a minimal guarantee fee. Additionally, the scheme extends its support to small traders, MSMEs, Farmer Producer Organisations (FPOs), and cooperatives, ensuring equitable financial access with higher guarantee coverage for smaller loans.

Union Minister of Consumer Affairs, Food, and Public Distribution Pralhad Joshi highlighted the importance of the scheme, urging the WDRA to accredit more warehouses and expand its reach to support farmers effectively.

Objectives of the Credit Guarantee Scheme

• Increase Post-Harvest Finance and Prevent Distress Sales: The primary goal of the Credit Guarantee Scheme is to provide farmers with increased access to post-harvest finance, helping them avoid distress sales by enabling them to store their produce and access credit when needed.

• Encourage Pledge Financing for Farmers and Traders: The scheme aims to encourage banks to offer loans against e-NWRs (electronic negotiable warehouse receipts), allowing farmers and traders to pledge their agricultural or horticultural produce as collateral.

• Address Credit and Warehouse Risks: The scheme seeks to mitigate risks related to both credit and warehouseman liabilities, ensuring greater security for lenders and promoting smoother financial transactions for farmers.

• Support Digital Initiatives: The initiative aligns with the government’s broader digital push, enhancing the adoption of electronic warehouse receipts and contributing to the overall digital transformation of India’s agricultural sector.

Salient Features of CGS-NPF Scheme

How Farmers Can Access Loans Under CGS-NPF

Farmers can access loans under the Credit Guarantee Scheme for e-NWR Based Pledge Financing (CGS-NPF) by following these steps:

• Store Produce in Accredited Warehouses: Farmers need to store their post-harvest produce in Warehousing Development and Regulatory Authority (WDRA)-accredited warehouses. These warehouses ensure that the stored produce is securely maintained and certified.

• Obtain Electronic Negotiable Warehouse Receipts (e-NWRs): After depositing their produce, farmers will receive electronic negotiable warehouse receipts (e-NWRs), which serve as a digital proof of ownership and value of the stored goods. These receipts are key to accessing credit under the scheme.

• Pledge the e-NWRs: Farmers can pledge the e-NWRs as collateral to secure loans from financial institutions such as scheduled banks and cooperative banks.

• Loan Application: Farmers approach the participating banks to apply for loans, using the e-NWRs as collateral. The loan can be used for agricultural purposes or post-harvest needs.

• Loan Approval and Disbursement: The bank will assess the pledged produce's value and approve the loan. Under the CGS-NPF scheme, loans are backed by a credit guarantee, making it easier for farmers to access financing even without traditional collateral.

• Repayment: Once the loan is disbursed, farmers are expected to repay it as per the terms agreed upon with the bank. The scheme offers various coverage options, including an 85% guarantee for loans up to ₹3 lakh, and 75%-80% guarantee for higher amounts, ensuring farmers’ access to credit with minimal risk.

This process helps farmers avoid distress sales and access institutional credit at affordable rates, improving their financial security and enhancing their ability to manage post-harvest challenges.

How CGS-NPF Benefits Farmers

• Enhanced Access to Credit: Farmers, especially small and marginal ones, often struggle to secure loans due to lack of collateral. The CGS-NPF bridges this gap by enabling them to pledge their produce and secure loans with minimal guarantee fees.

• Reduction in Distress Sales: Post-harvest periods often witness farmers selling their produce at low prices due to immediate financial needs. This scheme empowers them to store their produce securely and wait for favorable market conditions.

• Inclusive Financial Support: The scheme extends benefits to women farmers, Scheduled Castes (SC), Scheduled Tribes (ST), and Divyangjan (PwD) farmers. Additionally, it supports Farmer Producer Organisations (FPOs), cooperatives, and small traders, ensuring equitable access to financial resources.

• Encouragement for Warehouse Registration: By incentivizing the use of accredited warehouses, the scheme promotes the development of storage infrastructure closer to farmlands, reducing post-harvest losses.

Other Agricultural Credit Schemes

• Kisan Credit Card (KCC): Introduced in 1998, the KCC scheme provides farmers with affordable credit for agricultural inputs and production needs. With over 7.75 crore operative accounts as of March 2024, it ensures easy access to working capital, benefiting not only farmers but also those involved in animal husbandry and fisheries.

• Modified Interest Subvention Scheme (MISS): MISS offers concessional loans for crop production and allied activities. Farmers can avail loans up to Rs 3 lakh at an effective interest rate of 4% for timely repayment. The scheme also supports post-harvest loans against warehouse receipts for small farmers, ensuring financial stability during critical periods.

The CGS-NPF scheme aligns with the government’s vision of Aatmanirbhar Bharat (Self-Reliant India). By empowering farmers with financial resources, it enhances their self-reliance and boosts agricultural productivity. Furthermore, the scheme addresses systemic issues in agricultural finance, encouraging sustainable practices and equitable growth.

As the scheme gains traction, its impact on the agricultural sector is expected to be profound. By reducing farmers’ dependency on informal credit sources and enabling better price realization, the CGS-NPF can significantly improve rural livelihoods. Coupled with other government initiatives, it lays the foundation for a resilient and self-sustaining agricultural ecosystem.

The Credit Guarantee Scheme for e-NWR Based Pledge Financing (CGS-NPF) ensures that farmers are better equipped to navigate market challenges by addressing critical gaps in post-harvest financing and promoting inclusive financial support.