a. We are looking forward to do funding on pledged warehouse receipts (WAREHOUSE RECEIPT IS A DOCUMENT OF TITLE TO GOODS AS PER THE SALE OF GOODS ACT, 1930). Warehouse receipt (Warehousing is a regulated activity under APMC Laws and for commencement of warehousing activity in any location within a notified area, it is essential to obtain licenses from the APMC having jurisdiction over the respective market area. Since these licenses are for a period of one year and need to be renewed thereafter. The APMC Laws mandate trading of agricultural produce in the designated market yards in its jurisdiction, only by licensed traders of the respective APMC. The Act would apply in case of warehouse receipts based trading. If a person buys from a WR based market system and transports such goods they may be confiscated by APMC officials unless backed by valid licenses and papers to prove that mandi fees, cess etc has been paid) can be of following nature:
i. Negotiable WR (Can only be issued by licensed Warehouse by APMC and registered under WDRA) – According to WDRA no person shall commence or carry on the warehousing business by issuing negotiable warehouse receipt unless he has obtained a registration certificate under act. As updated on April 2012 WDRA website (http://wdra.nic.in) has list of registered warehouses, WSP. ii. No negotiable WR (Can only be issued by licensed warehouse under APMC Act) iii. Godown WR ( Goods are stored in private storage spaces which may not qualify as per specifications required to be called as Warehouse, mostly unlicensed)
Major banks (HDFC, Axis Bank, ICICI ) are doing funding on all three types of WR ( Source India Stat 2010 paper , though not aware of current exposure right now in each of the quadrant of WR). Except for type (i), as described above, the available legal remedies are time consuming and inadequate which gets worse with non uniformity of WR used in by type (ii) and type (iii).

4) According to me in case of prevailing ambiguity, though operational risk control may taper the risk reward curve, however we should be spending reasonable effort on legal agreement with WSP and Collateral Managers, tracking their performance through their rating transition matrix keeping in view the objective of legally recovering the loan in events, such as fraud or mis-management on behalf of the warehouse or insolvency of depositor.
5) I am working on drawing a liability matrix in case of possible risk scenarios with risk controls and legal recourse/process in each one of them.
Some more information about market structure of warehouses and various laws:
State Warehousing Acts:
• Regulate warehouses in some states that intend to store certain identified commodities as per the prevalent legislation and generally cover agricultural goods.
• In fact the multitude of agencies that grant licenses make it even more difficult for any player to scale up operations for a pan India warehousing business.
Need to resolve implication of one of our counterparties coming under Storage Orders and Essential Commodities Act. As a fund house to what extent it impacts us and if yes what is legal recourse??? :
• Large scale private investment in storage and marketing has been absent due to certain restrictive provisions of the EC Act and control orders issued there under
• Storage of goods is sometimes construed as hoarding and any order issued by the Government against hoarding of stock directly affects the warehouses that have to comply with all Government orders issued in respect of storage of goods and stock limits.
• In respect of various essential commodities, the State Governments have issued Dealers Licensing Orders, which require a person to obtain license before buying or storing specific commodities. In such license, the Government also specifies stock limits.