Monday, 21 November 2011

NABARD's refinance is available to State Co-operative Agriculture and Rural Development Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs), Commercial Banks (CBs) and other financial institutions approved by RBI. While the ultimate beneficiaries of investment credit can be individuals, partnership concerns, companies, State-owned corporations or co-operative societies, production credit is generally given to individuals. NABARD has its head office at Mumbai, India..

Criteria for refinance
      Technical feasibility of the project and adequate response from prospective beneficiaries
      Financial viability and adequate incremental income to ultimate borrower to repay the loan within a reasonable period
       Organisational capability to ensure close supervision

ü      The refinance is provided to SCARDBs, SCBs, CBs and RRBs. However, the beneficiaries of the programme are partnership concerns, companies, state-owned corporations or cooperative societies. But, finally the assistance reaches the individuals, who are members of the primary credit institutions.

ü      The refinance is usually 50% to 95% of the project cost. The balance will be met by the banks and the concerned state governments or the Government of India in the case of SCARDBs. With a view to ensure credit flow to certain thrust areas, the quantum of refinance is enhanced to 100% as in the case of special category beneficiaries like SC/ST members and self help groups.

Institutions Eligible for Refinance:

  State Co-operative Agriculture & Rural Development Banks (SCARDBs)
  Regional Rural Banks (RRBs)
  State Co-operative Banks (SCBs)
  Commercial Banks (CBs)
  State Agricultural Development Finance Companies (ADFCs)
  Scheduled Primary Urban Co-operative Banks (PUCBs)
  North East Development Finance Corporation (NEDFC)
  Non-Banking Financial Companies (NBFCs)


  Farm Sector :
Agriculture and allied activities such as minor irrigation, farm mechanization, land development, soil conservation, dairy, sheep/goat rearing, poultry, piggery, plantation/horticulture, forestry, fishery, storage and market yards, bio-gas and other alternate sources of energy, sericulture, apiculture, animals and animal driven carts, agro-processing, agro-service centres, etc.

  Non-Farm Sector :
Artisans, Small & Micro Enterprises, handicrafts, handlooms, power looms, etc

Loan Period :
  Upto a maximum of 15 years

Refinance Windows

  1. Automatic Refinance Facility (ARF): Automatic Refinance Facility (ARF) will be extended to the Commercial Banks/State Coop Banks/ Regional Rural Banks/Primary Urban Coop Banks/ADFCs/NEDFi/NBFCs without any upper ceiling on quantum of refinance, bank loan or TFO for all kinds of projects under Farm Sector (FS) & Non Farm Sector (NFS). However, ARF will be extended to the SCARDBs for projects with TFO up to `50.00 lakh for all kinds of projects under Farm Sector (FS) and Non- Farm Sector (NFS).
  2. Pre-sanction Procedure: In case, any bank intends to avail refinance under pre-sanction procedure, they may submit projects to NABARD.
  3. Project based lending ( Subject to Appraisal & Prior Sanction by NABARD )

Extent of Refinance

The extent of refinance will be as under:
  1. States in Eastern Region, North Eastern Region including Sikkim, Hilly States, Chhattisgarh and Lakshwadeep: 100% of eligible bank loans for all purposes.
  2. For Other Regions: 100% for all thrust areas as explained in Policy Circulars
  3. 95% for all other diversified purposes and 80% for Krishak Sathi Yojana. 70% to NBFCs for all eligible purposes.

Ultimate Borrowers

Although refinance is provided to SCARDBs/SCBs/CBs/RRBs/ADFCs/PUCBs/NEDFC the ultimate borrowers of investment finance may be individuals, proprietory/partnership concerns, companies, state-owned corporations or co-operative societies.

Interim finance

SCARDBs are being extended interim finance in order to enable them to provide investment credit to ultimate borrowers and avail refinance within 3 months against the same.

Types of Refinance Facilities

Credit Facilities
Commercial Banks
Long-term credit for investment purposes
Financing the working capital requirements of Weavers' Co-operative Societies (WCS) & State Handloom Development Corporations
Short-term Co-operative
Structure (State Co-operative Banks,
District Central Co-
operative Banks, Primary
Agricultural Credit Societies)
Short-term (crop and other loans)
Medium-term (conversion) loans
Term loans for investment purposes

Financing WCS for production and marketing purposes
Financing State Handloom Development Corporations for working capital by State
Co-operative Banks
Long-term Co-operative Structure
(State Co-operative
Agriculture and Rural
Development Banks,
Primary Co-operative
Agriculture and Rural
Development Banks)
Term loans for investment purposes
Pilot scheme for financing short term loans in three states
Regional Rural Banks (RRBs)
Short-term (crop and other loans)
Term loans for investment purposes
State Governments
Long-term loans for equity participation in
Rural Infrastructure Development Fund (RIDF) loans for infrastructure projects
Non-Governmental Organisations (NGOs) - Informal Credit Delivery System
Revolving Fund Assistance for various micro-credit delivery innovations and promotional projects under 'Credit and Financial Services Fund' (CFSF) and 'Rural Promotion Corpus Fund' (RPCF) respectively

Interest Rates


The rate of interest on refinance have been revised as under w.e.f 5 November 2011

Rate of interest as applicable in other than NER states & Sikkim (%)
Rate of interest as applicable in NER states & Sikkim (%)
Commercial Banks
10.50 (min)


Eligible Projects.

• Geographical areas and sectors to which credit is not flowing for various reasons; • Projects involving Sunrise technologies where risk perceptions of banks are very   high
• Thrust areas where NABARD has an important role to play
• Areas / projects where large outlays and long gestation period keep the banks  away.
• Projects involving longer repayment period.

Farm Sector Schemes

Village Adoption/Village development Plan, Backward Blocks, Bamboo Farming, MACs, Bio Fuels, Crop Insurance, Agriculture Commodities, SGSY, Farm Mechanisation, Land Purchase, Scheme for AgriClinic/ Agri-Business Centres (ACABCs), SEMFEX, Capacity Building for Adoption of Technology (CAT)
Agri Export Zone (AEZ), Contract Farming, Farmer's Club

Non-Farm Sector Schemes

1. Enterprise Loan Scheme (ELS)

The refinance schemes which are in force viz. Integrated Loan Scheme (ILS) and Composite Loan Scheme (CLS) have been merged and modified into a new scheme ie. Enterprise Loan Scheme (ELS).

Salient features

Institutions eligible - for drawal of refinance. Commercial Banks, Regional Rural Banks, State Co-operative Banks, State Co-operative Agriculture and Rural Development Banks and Scheduled Primary Urban Cooperative Banks.

Borrowers - Individuals, artisans, small entrepreneurs, groups of individuals, associations (formal and informal), proprietary/partnership firms, co-operative societies, registered institutions/ trusts, NGOs/voluntary agencies, private and public limited companies, etc financed by the above eligible institutions.

Purpose - To set up new units as well as for modernisation/ renovation/ expansion/diversification of existing units and also for replacement of old and obsolete machinery even if the units were not initially financed by the banks and refinanced by NABARD.
To change over to new process of manufacturing/introduction of new technology/ computerization, etc.  For Expansion/Diversification, any unit which is in existence for at least two years will be eligible.

Eligible activities - All manufacturing, processing, marketing and approved service activities in the SSI sector with emphasis on Cottage, Village, Tiny Industries, Rural Artisans and Rural Crafts. All activities in rural areas or benefiting rural areas that are income generating and/or employment generating, including all service sector activities, are eligible activities under NFS for refinance assistance.

Project Components - For block and/or working capital requirements of tiny/SSI/Service sector units.
In respect of cottage and village industries, artisans, etc, a component for consumption credit could be built in the Working Capital component keeping in view the value of the family labour engaged in the productive activity. If a unit avails Working Capital alone, the ceiling for refinance limit per unit shall be limited to Rs 10 lakh.

Repayment period of loan - The repayment period should be fixed between 2 years and 10 years with a need based moratorium of upto 18 months for individual cases, based on the debt servicing capacity of the borrower and taking into account the nature of activity to be financed, operating cycle, cash flow and the borrower’s sustenance needs.

2.Small Road and Water Transport Operators Scheme (SRWTO)

Borrowers - Individuals, groups of individuals including partnership/ proprietary firms and co-operative enterprises would be eligible for assistance under the scheme. The borrowers should be from the "rural areas" and should utilise the vehicle mainly for transportation of rural farm and non-farm products and inputs and passengers to/ from marketing centres.

Vehicles - The vehicle should be duly registered with Regional Transport Authority (RTA) as "public transport" vehicle.
The number of vehicles to be financed shall be subject to the ceiling on such number as stipulated by RBI for financing under priority sector lending (at present 10 vehicles).
Other t & c also to be complied.

Security and Insurance - The vehicle should be registered as 'public goods/ passenger carrier' with the Regional Transport Authority (RTA). The loan will be advanced against the hypothecation of the vehicle in favour of the financing institution. The hypothecation clause/ bank's lien should be noted with the RTA.
The vehicle should be comprehensively insured for the full value covering all risks. The insurance policy may be either in the joint names of the borrower and the bank or assigned in favour of the latter. The vehicle should be adequately insured at all times without any break.
The vehicle should be inspected periodically by the financing bank.

Repayment- Generally, the loan is repayable within 5 years with a moratorium period of 6 months.

3.Soft Loan Assistance Scheme for Margin Money

Objective - The objective of the scheme is to provide financial assistance to the prospective entrepreneurs who have the requisite talents and traits of entrepreneurship, but lack necessary monetary resources of their own for setting up units/implementing projects under NABARD refinance schemes for non-farm sector, SEMFEX II borrowers and innovative, high tech projects, export oriented units, agro-processing schemes, and agriculture graduates for setting up of Agriclinics and Agribusiness Centres covered under the farm sector.

Eligibility  - The loan assistance towards margin money will be available to the entrepreneurs/promoters comprising individuals, proprietary/partnership concerns, groups of individuals, industrial co-operative societies, government/quasi-government agencies, promotional agencies, development corporations, registered and charitable institutions and voluntary organisations.
Soft Loan Assistance for Margin Money will not be available for SRWTO schemes (with the exception to SEMFEX II borrowers) and Rural Housing.

Mode of Assistance
Margin Money assistance will be by way of soft loans to the entrepreneur/ promoter.

Scope of assistance
Margin money assistance shall be available to the deserving entrepreneurs of all categories covered under this scheme under ARF whether or not the financing bank avails refinance from NABARD, subject to the conditions stipulated in the following paragraphs.

Quantum of Assistance
The quantum of assistance will be determined, among other things, on the basis of the gap between the normal level of borrower's contribution (margin) prescribed by RBI and the borrower's own minimum contribution (stake) for the project to be stipulated by the bank and also the other subsidies/incentives/assistance, if any, provided by the Central/State Government(s).

Extent of refinance :
Refinance assistance to the financing banks will be provided to the extent of 100% of the margin money loan .

Rate of interest :
The refinance assistance provided against the loan for margin money will be, for the present, free of interest. However, the financing bank will be allowed to levy a service charge upto a maximum of 5% p.a (except for Agri-Clinic/Agri-Business where it is 2% p.a) simple rate at the discretion of the bank, on the outstanding amount of margin money loan. In the case of borrowers of SEMFEX-II, the banks may waive the service charge at their discretion.

Repayment period :
Margin Money loan will be recovered along with the term loan in suitable instalments.

Schemes under pre - sanction procedure

(i) Term Loan to SSI units (through CBs & Scheduled PCBs)


Individuals, Proprietary / Partnership concerns, Private/ Public Limited Companies, Promotional/ Developmental Organisations, State Level Federations/ Corporations, Joint Sector Undertakings.
Setting up of new units and modernisation/ renovation/ expansion/ diversification of existing units (other than agro-industries).

Eligible items for investment
Land and Site Development (including cost of land upto margin money required to be brought in by the borrower).
Construction of workshed (including civil structure, godowns for storage, market outlets and other essential amenities).
Plant & Machinery. (including machinery/ equipment required for packaging and preservation)
Equipment and tools.
Delivery van.
Project formulation and consultancy charges.
Preliminary and pre-operative expenses.
Margin for working capital.

Repayment period
3 to 10 years with moratorium of 12 months.
Debt Equity Ratio (DER) - 3 : 1

(ii) Term Loan to Industrial Co-operatives (through SCBs)

Industrial Co-operative Societies identified as viable/ potentially viable by the State Government.

Eligible items of investment
a) Acquisition of equipment and tools.   b)Construction of workshed.
c)Showroom.                           d)Godown.       e)Purchase of delivery van
(iii) Project Finance for Agro-Industries (through CBs, Scheduled PCBs & SCBs)

a) State level corporations such as agro-industries corporations, forest/ tribal development corporations, KVIC/ KVIB, state level cooperative societies/ federations, co-operative marketing/ processing and industrial societies, joint sector undertakings, registered societies in KVIC/ KVIB fold.

b) Public/ private limited companies, partnership firms and proprietary concerns.

Items eligible for term-loan assistance
Cost of land (upto the limit of margin to be brought in by the borrower), site development, construction of worksheds/ building, plant and machinery, equipment and tools, cost of technology upgradation, technical know-how and engineering, preliminary and pre-operative expenses, project formulation and consultancy fees, acquisition of transport vehicle, preservation including cold storage, packaging and marketing, etc.

Repayment period
3 to 10 years with moratorium of 12 months.

Debt Equity Ratio - 3 : 1

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