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Provision of Short-Term (ST) refinance to RRBs for financing Seasonal Agricultural Operations (SAO) - Policy for the year 2018-19
Ref. No. NB.DoR / ST Policy / 897 / A1 (Gen)  / 2018-19                   
06  July  2018
Circular No.  174 / DoR - 53 / 2018 
 
1.  The Chairman,
      All Regional Rural Banks
2.  The Chairman and Managing Director,
      All Sponsor Banks of Regional Rural Banks
 
Dear Sir
 
Provision of Short-Term (ST) refinance to RRBs for financing Seasonal Agricultural Operations (SAO) - Policy for the year 2018-19
 
Please refer to our Circular No. 165 / DoR-35 / 2017 dated 05 July 2017, communicating NABARD's policy for F. Y. 2017-18 for provision of short-term refinance to the Regional Rural Banks (RRBs) under Sec. 21(1) of the NABARD Act, 1981, for financing Seasonal Agricultural Operations (SAO). We advise that the ST (SAO) Refinance Policy for F. Y. 2018-19 has been revised. The detailed policy is mentioned in Annexure I. The eligibility norms of the revised ST (SAO) refinance policy are as under:
 
1. RRBs having CRAR of 9% and above as on 31.03.2017 will be eligible for refinance under ST (SAO). RRBs with CRAR less than 9% as on 31.03.2017, but more than 9% as on 31.03.2018 will also be eligible for refinance.
2. The quantum of ST (SAO) refinance will continue to be linked to net NPA level of the RRBs, as hitherto. However, no credit limits will be available to the RRBs having net NPAs above 15% (18% in NER and Hilly States).
3. For financing the below-mentioned activities, separate sub-limits under ST (SAO) credit limits will be sanctioned by NABARD for the year 2018-19. Accordingly, RRB may indicate credit limit requirements for the above purposes separately, in the credit limit application.
(a)       Cultivation of other crops (OC),
(b) Cultivation of oilseeds under National Mission on Oilseeds and Oil Palm 
(NMOOP- Oilseeds) in the identified districts,
(c)       Cultivation of pulses under National Food Security Mission – Pulses
            (NFSM –  Pulses) in the identified districts and
(d)       Production credit requirements of tribals under Development of Tribal 
            Population (DTP).
4. The rate of interest on refinance will be 4.5% p.a. during the year 2018-19, (subject to revision, if any, by Govt. of India) for only those RRBs which provide, including their own involvement, crop loans up to Rs 3.00 lakh per borrower at 7% p.a. or less. The Bank is required to furnish an undertaking as per Annexure II in this regard.
5. You may advise all the branches to accord top priority for implementation of KCC scheme by issuance of RuPay Card to the borrowing members.
 
6. The refinance allocation for your Bank for the year 2018-19 will be communicated to you, by our Regional Office (RO). You may submit an application for sanction of credit limit along with the first drawal, as per the prescribed proforma to the concerned RO of NABARD.
 
7. Please acknowledge receipt of this letter to our Regional Office.
Yours faithfully, 
(G R Chintala)
Chief General Manager 
Encl. -  5  pages 
Annexure I
Short-term (ST) refinance from NABARD to Regional Rural Banks (RRBs) for financing Seasonal Agricultural Operations (SAO) - Policy for F. Y. 
2018-19
1. Eligibility norms
1.1 Audit
Audit of RRB should have been completed for the year 2016-17 and the relative audit report together with the financial statements should have been received by the concerned RO of NABARD. Audit of the bank for the year 2017-18 should be completed and a copy of the audit report and financial statements submitted to the concerned RO of NABARD, latest by 30.06.2018.
1.2 Compliance with CRAR norms
Only such RRBs having CRAR of 9% and above as on 31.03.2017 will be eligible. RRBs with CRAR less than 9% as on 31.03.2017, but more than 9% as on 31.03.2018 will also be eligible.
1.3 Net NPA position as on 31.03.2017, as indicated in the statutory audit report, will form the basis for eligibility. However, in the event of any variation in the net NPA position as indicated in the audit report and the inspection report of NABARD, the latter would be reckoned for determining the eligibility. Net NPAs will be reckoned for the Bank as a whole and not at the level of RRB branches. In case of improvement or deterioration in any of the parameters (CRAR and net NPAs) as on 31.03.2018 [after completion of statutory audit], the same will be reckoned for eligibility of refinance limit.
1.4      Quantum of refinance
(i) The quantum of refinance to RRBs will be linked to net NPAs as indicated below:
General Region
Net NPAs of RRB Eligible limit
[As a percentage of Realistic Lending Program (RLP)]
Up to 6% 20%
Above 6% and up to 15% 15%
Above 15% Not eligible
(ii) RRBs in North Eastern Region, Jammu & Kashmir, Sikkim, Andaman & Nicobar Islands, Himachal Pradesh and Uttarakhand, will be eligible for an additional credit limit of 25% with relaxation in net NPAs, as under:
Net NPAs of RRB Eligible limit
[As a percentage of realistic lending Program (RLP)]
Up to 10% 45%
Above 10% and up to 18% 40%
Above 18% Not eligible
(iii) RRBs in Eastern Region viz. Bihar, West Bengal, Odisha, Jharkhand, Chhattisgarh States and 28 districts of Eastern Uttar Pradesh (under BGREI Scheme of Govt. of India) will be eligible for an additional credit limit of 5%, as under:
Net NPAs of RRB Eligible limit 
[As a percentage of realistic lending Program (RLP)]
Up to 6% 25%
Above 6% and up to 15% 20%
Above 15% Not eligible
1.5 In case of merged banks, the financial position of the new / merged RRB as on the date of notification / merger, based on special audit or the aggregate audited position as on 31.03.2017 of the erstwhile RRBs, will form the basis for sanction of limit to such new RRB for the year 2018-19. Further, if the statutory audit position as on 31.03.2018 is available, the same will be considered for sanction of credit limit to the banks.
1.6 Realistic Lending Program (RLP) for a year has been defined as the crop loans estimated to be disbursed during the year (i.e. not the outstanding which includes overdues). The RLP for the year 2018-19 may be arrived at on the basis of the average growth rate in crop loans, disbursed during the previous three years (taking into account the crop loans disbursed data for last four years). However, keeping in view the ground level realities and other facts, if any, NABARD may accept RLP which may be lower or higher than the RLP worked out by the bank.
2. Sub-limits for financing Other Crops, Oilseeds under NMOOP and Pulses under NFSM - Pulses and tribals under DTP
For financing the below-mentioned activities, separate sub-limits under ST (SAO) credit limits will be sanctioned by NABARD for the year 2018-19. Accordingly, RRB may indicate credit limit requirements for the above purposes separately, in the credit limit application.
(a)       Cultivation of other crops (OC),
(b) Cultivation of oilseeds under National Mission on Oilseeds and Oil Palm 
(NMOOP- Oilseeds) in the identified districts,
(c)       Cultivation of pulses under National Food Security Mission – Pulses
            (NFSM –  Pulses) in the identified districts and
(d)       Production credit requirements of tribals under Development of Tribal 
            Population (DTP).
3. Financing of Tenant Farmers (TF) / Oral Lessees (OL)
Considering the importance attached by Govt. of India for financing of tenant farmers and oral lessees, NABARD has prepared Joint Liability Group Scheme and circulated amongst the banks. The banks should ensure maximum financing to TF / OL under this Scheme or otherwise.
4. Operational disciplines
4.1 The operative period of ST (SAO) limit for the year 2018-19 will be from 01.04.2018 to 31.03.2019. ST (SAO) refinance will be provided to RRBs, only in respect of crop loans disbursed during the said operative period.
4.2 Drawals made on credit limits are repayable on demand from NABARD. However, each drawal under the limit, may be allowed by NABARD for a maximum period of 12 months.
4.3 Drawal of refinance by RRBs under ST (SAO) limit will be restricted to applicable percentage of refinance of the loan issued during the year 2018-19.
4.4  Drawals by RRBs on the credit limits will be permitted subject to the availability of aggregate NODC under all sub-limits (instead of sub-limit wise NODC). For this purpose, RRBs are required to furnish to the concerned RO of NABARD, monthly NODC statement so as to reach latest by 20th of the succeeding month. For sub-limit wise shortfall in NODC, no penal interest will be charged, if overall NODC is available.
4.5 At the time of each drawal, a certificate in the prescribed format, regarding the availability of aggregate NODC, as on the date of drawal will have to be furnished by the bank. Moreover, it may be ensured by the bank that on any day, the ST (SAO) outstanding [under all ST (SAO) sub-limit accounts taken as a whole] should not exceed the aggregate NODC available on that date.
4.6 RRBs should clear the deficit in NODC, if any, immediately, so as to ensure availability of adequate non-overdue cover for borrowings from NABARD. In case the deficit is not regularized within one month, from the date of occurrence of such deficit, the RRB concerned will have to pay additional interest of 1% on the amount of deficit in NODC, for the duration of the deficit, till the position is regularized.
5. Excess drawal
NABARD will take a serious view in case of availment of drawals beyond permissible quantum of refinance on account of reporting of incorrect data about crop loan disbursement or of NODC. In such cases, NABARD may call back the excess refinance availed by bank within 3 days along with the penal interest of 1% pa.
6. Segregation of principal and interest in the loans outstanding
As hitherto, RRBs may continue to exclude the interest component (overdue / non-overdue interest) from the outstanding amount and report the principal loan amount only, both in their applications for credit limit and drawal application, for arriving at the eligibility for refinance support from NABARD. Besides as hitherto, only the principal portion of loans (issued, recovered, outstanding and overdue) should be reported in the monthly NODC statements.
7. Rate of interest on refinance
The rate of interest on refinance will be 4.5% p.a. during the year 2018-19, subject to revision, if any, by Govt. of India, for only those RRBs which provide, including their own involvement, crop loans up to Rs 3.00 lakh per borrower at 7% p.a. or less. This will be applicable for the refinance drawn from 01.04.2018 onwards, against the crop loans disbursed from 01.04.2018 onwards. Interest is payable at half-yearly rests on 01 October and 01 April, as hitherto. The Bank is required to furnish an Undertaking as per Annexure II in this regard.
8. Clearance of defaults
RRBs which fail to honour their commitments to NABARD in repayment of principal, payment of interest and / or other dues by the prescribed due dates, will not be eligible for any type of refinance facility from NABARD. Resumption of refinance may be considered, only after the bank clears the default. In the event of default in repayment of principal and / or payment of interest, the RRBs will be liable to pay to NABARD, interest on amount of default at 10.25% p.a. for the period for which the default persists. Such penal interest rate is subject to revision from time to time.
9. Right to inspection 
NABARD reserves the right to inspect / get inspected the books of accounts of the bank.
10. Right to cause special audit  
NABARD will have the right to cause special audit of the books of accounts and other relevant material of the banks, either by itself or through other agencies, to ensure that the same are maintained as per the rules and regulations in force and the terms and conditions of refinance are adhered to by the bank.
11. End-use of limit 
There are reports that banks have not ensured end-use of funds disbursed as short-term crop loans.  With a view to avoid diversion of funds, misutilization of interest subvention / crop loan and to ensure proper end-use of funds, the banks have been advised to follow the instructions contained in our (Circular No. 175 / DoR - 47 / 2015 dated 20 August 2015), which are required to be complied with.
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Annexure II
UNDERTAKING TO BE OBTAINED FROM RRBs ON THEIR LETTERHEAD
The Chief General Manager / General Manager
NABARD
--------------- Regional Office
--------------- .
Dear Sir,
We are aware that the rate of interest on refinance provided by NABARD for ST (SAO) during the F.Y. 2018-19 is 4.5% p.a. subject to change, if any, by Govt. of India / Reserve Bank of India / NABARD from time to time. We are also aware that the facility of interest subvention made available by Government of India, is also subject to change from time to time.
We undertake to abide by the change/s, if any, as may be made by the Govt. of India / Reserve Bank of India / NABARD from time to time.
Thanking you,
Yours faithfully,
------------------
Name: --------------------------
Designation: Chairman
Date: ----------------