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About Cold Storage Loan

Agricultural sector is the mainstay of our economy. It is a vast industry that supports the livelihood of many especially in the rural areas. Cold storage loan is a type of agricultural loan that is available to farmers/individuals/group of individuals who run business of cold storage. This loan is used to set up cold storages or for expanding existing business of cold storages.

Cold storages are used to store produce/dairy products/meat products etc., which then get transported to many parts of the country. It is an important part of the food chain and is a critical element to ensure far flung areas of the country get required agricultural produce in good condition. It is a thriving business in our expanding economy.

Running a cold storage set-up requires much capital investment and this type of loan is aimed at such needs. Many banks in the country offer this type of loan. National Bank for Agriculture and Rural Development is one of the biggest lenders of this type of loan.

Cold Storage Loan
Cold Storage Loan

Purpose of Cold Storage Loan

Cold storage loan helps agriculturists who are in the business of providing cold storage facility/warehouse to store agricultural commodities. This is a crucial stage in the entire food chain process and ensures that these commodities reach all corners of the country in good condition. There are some terms and conditions to avail this loan and it varies from bank to bank. It is a secured type of loan and requires a collateral as a guarantee. Cold Storage loan also helps in setting up the business for the first time and is useful in ensuring enough capital is available for day to day operations.

Features of Cold Storage Loan

With the agricultural sector as the largest sector in the Indian economy, such loans are useful in supporting new business and growing current ones. Some of the salient features of this loan are:

  • Cold storage loan is a secured loan. Hence, the borrower needs to pledge an asset as a collateral.
  • It can be used to construct a new cold storage infrastructure or expand or modernize an existing facility.
  • In most cases, funding can be received for about 75% of the total project cost.
  • Individuals/Group of Individuals/Co-operative societies/Companies are eligible for this type of loan.
  • Mortgage of land or the site of the cold storage can be used as a collateral for this loan.

Eligibility Criteria for Cold Storage Loan

Following are the eligibility criteria laid out for those who would like to avail this loan:

  • Individuals/Group of Individuals
  • Cooperatives/Companies/Proprietary/Partnership concerns
  • Banks check the reputation of the promoters of such business.
  • Capacity storage should not exceed more than 5000 MT.
  • If it is an existing facility, it should be in a running condition and must be a profitable business for the last 3 years.
  • Accounts must have been maintained as per rules.
  • For new projects, the feasibility study must be submitted to the bank for assessment.

Interest rates and other charges on Cold Storage Loan

While interest rates are typically based on the loan amount and the tenure of the loan, the interest rate on cold storage loans are fixed on the CRA as applicable to Agricultural Advances. These figures are subject to change depending on the financial policies of the financial institutions and Government impetus for the sector. The repayment period is capped at 9 years with most lenders.

Some of the other details of this loan which is a wide range available with most banks are:

TenureVaries from 6 to 9 years
Loan AmountRanges from Rs. 25 lacs to Rs 1 crore

Needs to be provided which covers 100% of the loan amount

Personal guarantee of the promoters/partners/directors

Maximum Funding available60% to 75% of the total project cost

How to Apply for a Cold Storage Loan

In order to apply for a cold storage loan, it is best to visit the closest bank branch of your preferred banking partner. It will be possible to discuss the details of your project in person with the concerned at the bank. This will help in establishing an interest in lending a loan as well as quick processing of your application. Another option for rural based businessmen is to approach marketing officers who visit designated areas on a regular basis. They will be able to assist with the updated details of the loan and guide you through the process.

As is the case with regular loans, there are some documentations required for availing this type of loan:

  • Application form duly filled
  • Photograph of the borrower
  • Pledge of warehouse receipts which shows stocks of agricultural commodities in warehouses of Central/State Warehousing corporations
  • Hypothecation of produce stored separately with the farmer

Top Banks offering Cold Storage Loans

Some of banks that offer Cold Storage Loans are:

  • SBI
  • Corporation Bank
  • Union Bank of India
  • Canara Bank
  • Vijaya Bank
  • IDBI Bank

FAQs: Cold Storage Loan

1. What is cold storage loan?

Cold storage loan is offered to those in the business of providing cold storage facility to protect produce/agricultural commodities from decaying before reaching various parts of the country.

2. Is there a requirement of collateral for this type of loan?

Yes, the borrower needs to provide an asset guarantee or collateral that covers 100% of the loan amount. Mortgage of land/site of the cold storage is considered as a collateral.

3. Is the loan to be renewed on an annual basis?

Yes, this type of loan is to be renewed on a 12-month basis. The bank will assess the satisfactory conduct of the facility and then only renewal process is completed.

4. What is maximum amount of loan that can be availed?

Most of the lenders offer a maximum loan amount of Rs. 1 crore under this category.

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