Genesis of RIDF

In the Union Budget Speech 1995-96, Hon'ble Finance Minister announced that- "Inadequacy of public investment in agriculture is today a matter of general concern. This is an area which is the responsibility of States. But many States have neglected investment in infrastructure for agriculture. There are many rural infrastructure projects which have been started but are lying incomplete for want of resources. They represent a major loss of potential income and employment to rural population."

2. Corpus and Sources of Funds

RIDF-I was launched in 1995-96 with an initial corpus of Rs.2000 crore through contributions both from public and private sector having shortfall in the agricultural lending Since 1996-97 i.e. RIDF-II, sources of deposits from commercial banks has been broad-based by including shortfall either in direct finance to agriculture and/or shortfall in priority sector lending. The tranche-wise size of corpus has been as under : 

3. Disbursements & Outstandings

Total sanctions as on 30 June 2007 aggregated Rs. 61312.27 Crore. The total cumulative disbursements as on 30 June 2007 were Rs.38581.82 crore. See ANNEXURE – I – RIDF at a glance (as on 30 June 2007).

Further, during 2006-07 a loan of Rs.4000 crore was sanctioned to NRRDA under a separate window under RIDF-XII for funding rural road component of BHARAT NIRMAN.

4. Sanction of Projects

The projects pertaining to eligible sectors under each  RIDF tranche are submitted by the State Governments through their Finance department to NABARD’s Regional Offices. The project proposals are scrutinized and appraised by the Regional Office with the help of Consultants by conducting desk and field appraisal.  Appraisal reports submitted by the ROs are then scrutinised by State Projects Department at HO before placing the same to Project Sanctioning Committee (PSC) for consideration of sanction. PSC is a committee of the Board of Directors with following Members:

          Chairman of NABARD;
          Managing Director of NABARD;
          Secretary (Banking), MoF, GoI, on the Board of NABARD;
          Secretary, Ministry of Rural Development, GoI, on the Board of NABARD;
          Secretary, Ministry of Agriculture, GoI, on the Board of NABARD;
          Deputy Governor, RBI, on the Board of NABARD;
          One Nominee from RBI Board of Directors: and
          Two State Government Representatives from the Board of NABARD.

Normally seven or eight meetings of PSC are held in a year to sanction loans from the RIDF corpus. Sanctioning process under RIDF XI (2006-07) has been operationalised and completed. Process of sanctions under RIDF-XIII and disbursements under ongoing tranches of VI to XII is in progress

Sanction of projects is communicated to the State Governments by a sanction letter which consists of General Terms and Conditions as well as Special Terms and Conditions / suggestions which are project specific.

5. Borrowing Institutions

Initially, only Sate Government were eligible to borrow out of RIDF on project basis. However, Panchayat Raj Institutions(PRIs), Non- Govermental Organistions. Self-Help Groups, etc. were made eligible to borrow out of RIDF w.e.f. 1st April 1999 .

6. Activities/Sectors financed under RIDF

Only ongoing Irrigation, Flood Protection, Watershed Management projects were financed under RIDF-I as a 'last mile approach' to facilitate completion of the projects delayed on account of financial constraints.

The financing of rural Road & Bridge projects was started during RIDF-II. Subsequently, coverage of RIDF was broad-based in each tranche and at present, a wide range of 31 activities such as Primary and Secondary Schools, Primary Health Centers, Village Haats, Joint Forest Management, Terminal and Rural Market/Godowns, Rain Water Harvesting, Watershed development, flood protection, drainage, Cold Storage, Riverine Fisheries, Fishing Harbour & Jetties, Mini/Small Hydel Projects (upto10 MW) in Power Sector, Rural Drinking Water Supply Schemes, Village knowledge Centres, Modern abattoir, Seed/Agri./ Horticulture Farms, Anganwadi Centres, Rural Industrial Estates (KVIC)/ Centres etc. are also being financed.

All new "project concepts" received from various State Governments are placed before the PSC for approval before accepting detailed projects from State Governments for financing.

7. Rate of Interest on RIDF Loan

The rate of interest on outstandings under various tranches are as under:

@ w.e.f. 16 April 2005 for loans disbursed on or before 31 October 2003

*  on loans disbursed w.e.f. 01 November 2003

8. Differential Rate of Interest to Banks

The rates of interest on deposits received from the banks under tranches I  to VI were less by 0.5% than the rates of interest charged by NABARD on RIDF loans to the State Govts. With a view to encouraging commercial banks to enhance flow of direct credit to agriculture, it was decided by RBI to link interest on bank contribution to RIDF, from Tranche-VII, to the extent of the shortfall of their agriculture lending vis-à-vis the targets. The inversely proportional rate of interest paid to commercial banks at present is as under:

As per the guidelines of RBI/GOI, NABARD retains a margin of 0.5% on cost basis for administering RIDF. The differential interest, however, is credited to the Tribal Development Fund maintained by NABARD.

9. Period of Loan

The repayment period of 5 years including a 2 year grace period was provided under RIDF-I to RIDF-V. The repayment period has, however, been extended to 7 years including a grace period of 2 years since RIDF-VI and the same policy is continuing.

10. Normative Allocation

Corpus in Tranche is allocated among all States on the basis of norms  prescribed by the PSC. Currently, the allocation norms provide weightage  to rural population (25%),  Geographical Area of the State (25%) and Infrastructural Development Index (25%) and availement of sanction(5%) and disbursements(20%) in the past tranches. Some of the State Governments are not able to fully utilise the allocation  and the State-wise allocations are reviewed by PSC from time to time and accordingly reallocated.

11. Nodal Department for RIDF

The Finance Departments of the State Governments act as Nodal Departments for operationalising RIDF. The project proposals are routed through the Finance Department only and no proposals are accepted directly from any other Department of the State Government. All other related items of work like submission of drawals applications under sanctioned projects, Release of loan, execution of documents, repayment of loans, etc., are attended to by Finance Departments of the State Governments.

12. Appraisal of Projects

Regional Offices receive the detailed project reports from State Governments based on their priorities and within the priorities/activities decided under RIDF. The detailed project reports are subject to field and desk appraisal by a team comprising of NABARD officers as well as consultants, who are normally senior retired officers of the concerned departments of State/Central Government.

13. Documentation

Besides normal documents such as acceptance of General and Special Terms & Conditions of sanction, Time Promissory Note (TPN), the State Government has to execute mandate with the RBI ( Central Accounts Section, Nagpur ) authorizing the latter to debit their current account and pay to NABARD in case of any default in payment of principal or repayment of interests on due date. The State Governments are required to furnish a certificate to the effect that the advances drawn are within the limits prescribed by the State Legislative Assembly under Article 293(1) as also within the borrowing limit fixed by the Government of India under Article 293(3) of the Constitution of India.

14. Phasing of the Projects

The normal phasing ( Project implementation Period ) under RIDF-I was 2 years whereas under subsequent tranches of RIDF, it is 3 years. However, due to operational constraints, phasing has to be normally extended for the Tranche as a whole or for specific projects to enable the State Governments to complete the projects.

15. Release of Funds

Mobilisation advance / Start up advance @ 20% of the RIDF Loan sanctioned under the projects is released to the State Governments on conveying acceptance of the terms & conditions of sanction by the State Government, before incurring expenditure on the projects for procurement and supply of materials, etc.

Loans are released on reimbursement basis against the actual expenditure incurred in execution of sanctioned projects. RIDF loans are released to the State Governments by Regional Offices of NABARD.

16. Cost Escalation

It is expected that RIDF projects would be completed on time within the approved cost. Proposals for cost escalation are considered based on merits.

17. Monitoring of RIDF Projects

Monitoring of projects is basically the responsibility of the State Governments. Yet an effective monitoring mechanism developed by NABARD is one of the strong features of RIDF. Currently, 9000-10,000 projects which  constitute about 9% of the ongoing projects are annually field monitored by Districts Development Managers, other officers of ROs and Consultants. Selective sector-wise monitoring is undertaken by the HO and through external agencies also.

18. Monitoring Committees

In addition to the field monitoring, institutional mechanism has been developed for sectoral and project-wise review at the level of Superintending Engineers, Chief Engineers, Head of the Departments, Administrative Secretaries & Chief Secretaries to facilitate timely completion of RIDF projects. The mechanism has stabilised and is working satisfactorily. NABARD also organizes capacity building workshops for the Govt. staff working in various line departments connected with RIDF projects.

19. Announcement of RIDF XIII for 2007-08

a) While presenting the Union Budget , Hon’ble Finance Minister announced that the corpus of RIDF XIII will be increased to Rs. 12000 Cr. to be implemented during 2007-08. The following activities will be covered under RIDF XIII:

1. Rural Roads;
2. Rural Bridges;
3. Minor Irrigation Projects/Micro Irrigation;
4. Soil Conservation;
5. Flood Protection;
6. Watershed Development/Reclamation of waterlogged areas;
7. Drainage;
8. Forest Development;
9. Market Yard/Godown, Apna Mandi, rural haats and other marketing infrastructure;
10. Cold storage, Public or Joint sector cold storage at various exit points;
11. Seed/Agriculture/Horticulture Farms;
12. Plantation and Horticulture;
13. Grading and certifying mechanisms such as testing and certifying laboratories etc.;
14. Community irrigation wells of irrigation purposes for the village as a whole;
15. Fishing harbours/jetties;
16. Riverine Fisheries;
17. Animal Husbandry;
18. Modern Abattoir;
19. Medium Irrigation Projects;
20. Drinking Water;
21. Infrastructure for Rural Education Institutions;
22. Public Health Institutions;
23. Construction of toilet blocks in existing schools, where necessary, specially for girl students, so as to improve the amenities available in schools;
24. "Pay & use" toilets in rural areas;
25. Major Irrigation Project (only those projects already sanctioned and under execution);
26. Village Knowledge Centres;
27. Desalination plants in coastal areas;
28. Mini & Small Hydel Projects (upto 10 MW);
29. Infrastructure for Information Technology in rural areas;
30. Construction of Anganwadi Centres;
31. Setting up of rural industrial estates(KVIC)/Centres.

b) Bharat Nirman

 The Union Budget also indicated that the separate window created under RIDF XII will continue under RIDF XIII also with Rs.4000 crore for funding rural road component of Bharat Nirman.