Ref. No. NB.DoR / 1773 / LT Policy - 9 / 2022-23
Circular No.70/DoR - 23/2022
19 April 2022
The Managing Director/ CEO
NABFINS/ NABSAMRUDDHI/ NABKISAN
Madam/ Dear Sir
Operational Guidelines for Schematic Lending under Long Term Refinance for F.Y 2022-23 - Subsidiary Companies of NABARD
The operational guidelines for LT refinance for the year 2022-2023 for NABARD Subsidiary companies have been finalized and enclosed herewith. These Guidelines supersede all the existing guidelines in this regard.
2. It has been decided that henceforth, the refinance proposals of all subsidiary companies may be submitted directly to DOR HO for sanction and release.
3. The Circular is also available on NABARD website www.nabard.org under the tab information Centre.
4. Please acknowledge receipt.
(Vivek Krishna Sinha)
Chief General Manager
Encls : 6 pages
Schematic Lending for F. Y. 2022-23 - Operational Guidelines
NABARD provides refinance to its subsidiary companies viz. NABSAMRUDDHI, NABFINS and NABKISAN to extend credit support to agriculture and rural development activities. Refinance is extended through Automatic Refinance Facility and pre sanction route both under Farm Sector (FS) and Non-Farm Sector (NFS) activities.
The objectives of providing long-term refinance are as under
- Supporting capital formation in agriculture and allied activities, thereby promoting growth of Agriculture, AH, Fishery, Forestry etc. sectors.
- Directing flow of credit for promotion of thrust activities of GoI and NABARD.
- To meet the credit requirement of JLGs and SHGs.
- Support for non-farm sector activities (MSME, Rural Housing & CV), thereby promoting alternate employment opportunities in rural and semi-urban areas.
- Support for Climate Adaptation and Mitigation projects
- Refinance support for credit linked capital subsidy schemes of GoI, whose subsidy is channelized through NABARD.
3. Nature of Accommodation
Refinance assistance is provided to the subsidiary companies against their disbursements, for various purposes under the following two windows:
3.1 Automatic Refinance Facility (ARF)
Automatic Refinance Facility (ARF) enables the agencies to obtain financial accommodation from NABARD, without going through the detailed procedure of pre- sanction formalities. Subsidiaries are expected to appraise the proposals at their own level and finance the borrowers. They can claim refinance from NABARD on the basis of a declaration (drawal application), indicating the various purposes for which refinance has been claimed and the loan amount disbursed. In such cases, the sanction and disbursement of refinance are attended to simultaneously by NABARD. Automatic Refinance Facility is extended without any upper ceiling of quantum of refinance, bank loan or Total Financial Outlay for all kinds of projects under Farm Sector (FS) & Off-Farm Sector.
Subsidiaries can also avail of refinance under pre sanction procedure where they are required to submit the projects for approval of NABARD. Before sanction of the same, NABARD appraises these projects to determine its technical feasibility, financial viability and bankability. In such cases, the loan will be sanctioned after the due appraisal.
4. Quantum of refinance
The quantum of refinance to these agencies (which generally do not have access to funds from market/ other sources) shall be :
i. 95% for all thrust areas as indicated at para no. 5.2
ii. 90% for all other diversified purposes
To take care of exposure risk on cumulative basis, the total refinance outstanding should not be more than the quantum of performing loans, held by the subsidiaries, as per the latest RBI guidelines.
5. Eligibility criteria
Eligibility criteria for drawal of refinance from NABARD are reviewed from time to time. The eligibility criteria prescribed for the year 2022-23 are as under:
5.1 Registration: It should have a certificate of registration under Sec. 45-IA of the RBI Act, 1934 to function as an approved financial institution.
5.2 CRAR: Should maintain minimum capital adequacy ratio as stipulated by RBI from time to time (at present it is 15%).
5.3 Net Profit: Should be in Net Profit for at least three out of the preceding four financial years (3 financial years out of 2018-2019, 2019-2020, 2020-2021 and 2021-2022).
5.4 Net NPA: Should not exceed 4%.
5.5 The Memorandum of Association should have a provision for borrowing from other financing agencies including higher financing agencies like NABARD.
5.6 Any improvement in the financial parameters after 31.03.2022 will be considered based on the result of the agency after due certification by a Chartered Accountant.
6. Eligible Activities
6.1 Agriculture and allied activities, microfinance, rural housing, renewable energy, MSME, and other eligible loans which are outstanding in the books of the bank with a residual maturity period of more than 18 months as on the date of drawal application will be eligible for refinance. List of eligible activities is given in Annexure I.
The list is only illustrative and not exhaustive. Activities not mentioned therein may also be covered if it facilitates the promotion of agriculture and rural development.
6.2 Thrust Areas
Thrust areas for which preference will be given for release of refinance include Land development, minor & micro irrigation, water saving and water conservation devices, fisheries, animal husbandry, SHGs / JLGs / Rythu Mithra Groups (RMGs), agri-clinics and agri-business centres, rural housing, agro-processing, wasteland development, dryland farming, contract farming, area development schemes, plantation & horticulture, agro-forestry, seed production, tissue culture plant production, agri-marketing infrastructure (including cold storage, godowns, market yards etc.), agriculture implements, non-conventional energy sources, financing in areas of watershed & tribal development programmes already implemented.
6.3. OTHER ELIGIBLE PURPOSE ARE PRESENT IN ANNEXURE I. ANY OTHER ELIGIBLE ACTIVITIES APPROVED BY BOARD OF SUBSIDIARIES.
6.4 Any other eligible activity, other than those mentioned at 6.1, 6.2 and 6.3 which is approved by the Board of Subsidiary will also be eligible.
7. Terms and conditions for funding
Standard terms and conditions as prescribed by NABARD from time to time will be applied. NABARD reserves the right to conduct spot verification / checks to ensure that terms and conditions of refinance are adhered to / complied with by the subsidiary companies viz. NABSAMRUDDHI, NABFINS and NABKISAN.
7.1. Interest on refinance: The interest rates on refinance will be decided by NABARD and is subject to revision from time to time.
7.2. Penal interest In the event of default, penal interest rate of 2.00% p.a, will be charged on the defaulted amount for the period of default
7.3. Pre-payment facilitation charges: The rate of pre-payment facilitation charges will be 2.50% p.a. and will be chargeable for each instalment due separately for the entire period from the date of pre-payment to the date on which the instalment is actually due for payment with a minimum period of 06 months. The prepayment can only be initiated after minimum notice of 3 working days. However, in case the prepayment is out of genuine recoveries, the benefit of waiver of pre- payment penalty will be considered to the subsidiaries of NABARD.
8. Repayment period
Repayment period ranges between 18 months (minimum) and 5 years or above. The due date for repayment of principal and interest will be quarterly with principal due dates on 30th June, 30th Sep, 31st Dec and 31st March and interest due dates on 1st July, 1st October, 1st January and 1st April. The first due date of principal amount for refinance sanctioned on any date in a quarter will fall in next quarter. The approved repayment schedule will be specified in the letter(s) of sanction.
The security norms prescribed for NABARD Subsidiaries are as under:
a. Execution of General Refinance Agreement (GRA) with NABARD.
b. Mandate to debit the Current Account of the Subsidiary with their principal banker which is duly authorized by principal banker.
c. Holding the securities obtained by NABARD Subsidiaries for the loans covered by refinance, in trust, for NABARD.
d. Board resolution indicating the borrowing powers of the agency, authority to borrow from NABARD, authorised signatory list with specimen signatures and a certificate confirming that the current borrowing from NABARD is within the overall borrowing limit of the agency.
NABARD has decided to waive furnishing of any additional security by the NABARD subsidiaries for the refinance sanctioned by it.
10. Pre Audit, Monitoring and supervision of projects
NABARD will have the right to cause special audit of the books of accounts and other relevant material either by itself or through other agencies (at borrowing entity's cost) to ensure that same are maintained as per the rules and regulations in force and the terms and conditions of refinance are adhered to by the bank. NABARD would have the right to conduct spot verification / checks to ensure that the terms and conditions of refinance are adhered to.
All disbursements to NABARD subsidiaries will be pre audited by the concurrent auditors of the bank before its release.
Activities covered under Automatic Refinance Facility
1. Farm Sector
i. Land development
ii. Minor & micro irrigation, drip irrigation
iii. Water saving and water conservation devices
ix. Animal husbandry
x. Loans to Self Help Groups / Joint Liability Groups / Rythu Mitra Groups
xi. Dryland farming
xii. Contract farming
xiii. Plantation & horticulture
xv. Seed production
xvi. Tissue culture plant production
xvii. Loans to corporate farmers, farmers' producer organizations/ companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in Agriculture and Allied Activities, up to an aggregate limit of Rs 2 crore per borrower
xviii. Agriculture implements
xix. Production of high value / exotic vegetables, cut flowers under controlled conditions i.e. poly house / green house,
xx. Establishment of hi-tech export oriented production like mushroom, tissue culture labs, precision farming for enhancement of productivity in vegetables and fruits.
2. Other Activities
i. MSME for both manufacturing and service, that creates employment in rural areas
ii. Agri-clinics and Agri-business centres
iii. Start-ups, as per definition of Ministry of Commerce and Industry, Govt. of India that are engaged in MSME, agriculture and allied services
iv. Rural housing
v. Commercial Vehicles
vii. Soil conservation and watershed development.
viii. Agri-marketing infrastructure (including cold storage, warehouse, godowns, market yards, silos etc.) irrespective of their location
ix. Non-conventional energy sources,
x. Financing in areas of watershed & tribal development programmes already implemented.
xi. Plant tissue culture and agri-biotechnology, seed production, production of bio-pesticides, bio-fertilizer, and vermi composting.
xii. Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multipurpose Societies (LAMPS) for on-lending to agriculture.
xiii. Loans sanctioned by banks to NBFC-MFIs for on-lending to agriculture sector
xiv. KVI (Khadi Village Industries)
xv. Rural Schools, health care facility, drinking water facility, sanitation facility and other Social infrastructure in Rural areas
xvi. Renewable energy like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification
xvii. Installation of stand-alone Solar Agriculture Pumps and for solarisation of grid connected Agriculture Pumps; installation of solar power plants on barren/fallow land or in stilt fashion on agriculture land owned by farmer.
xviii. Construction of oil extraction/ processing units for production of bio-fuels, their storage and distribution infrastructure along with loans to entrepreneurs for setting up Compressed Bio Gas (CBG) plants.
xix. Custom hiring Units managed by individuals, institutions or organizations who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake farm work for farmers on contract basis.
xx. Krishak Sathi Yojana
xxi. Area development schemes
xxii. Loans to entities involved in assisting the decentralized sector in the supply of inputs and marketing of output of artisans, village and cottage industries. In respect of UCBs, the term “entities” shall not include institutions to which UCBs are not permitted to lend under the RBI guidelines / the legal framework governing their functioning.
xxiii. Permissible Activities under Food Processing Sector
3. Any other activities not mentioned above may also be covered if it facilitates the promotion of agriculture and rural development.