Transformation of collateral management industry into an asset servicing business adds value to the commodities sector's policy ambitions. Discuss (200 Words)
Refer - Business Line
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IAS Parliament 3 years
KEY POINTS
· Exports and the food processing industry rely on robust supply chains and their connectivity with financial institutions to source cheap funds and raw materials.
· Besides the quality of the raw materials, the traders and processors would also require a competitive financial environment and access to it.
· Apart from financing receivables, the commodities procured and stored (warehouse receipts) can also become effective collateral for the bankers to lend against.
· WDRA registered warehouse service providers (WSPs) and the issuance of eNWRs, are expected to ensure the quality and quantity of goods underlying the warehouse receipts.
· Asset service providers in commodities may also extend forecasting services to forewarn risks in commodity financing and advisory in areas such as stock limits, disclosure of storage, etc.
· It will ensure the independence of audit and advisory about commodities underlying the eNWR pledged and its issuer WSP.
· The collateral manager under the mandatory WDRA registration regime would not have to provide for the physical security of the commodity under an eNWR, and that would instead be taken care of by WDRA.
· Such transformation of the 'collateral management industry' into an 'asset servicing business' will add value to the commodities sector's policy ambitions of increased financialisation.
