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Sanction of term loans to State Governments under Section 27 of the NABARD Act,2018 for Contribution to share capital of cooperative credit institutions-Policy for the year 2018-19
Ref. No. NB.DoR. ST-Policy/  210      /A.101/2018-19 
 
11 April 2018
Circular No.    68   /DoR-  14    / 2018                               
The Chief Secretary to the Governments
All States and Union Territories
 
Dear Sir
 
Sanction of term loans to State Governments under Section 27 of the NABARD Act, 1981 for Contribution to share capital of cooperative  credit institutions -  Policy for the year 2018-19
 
 
NABARD provides long-term loans by way of reimbursement to State Governments under Section 27 of NABARD Act, 1981 for contributing to the share capital of cooperative credit institutions, viz. State Cooperative Banks (StCBs), District Central Cooperative Banks (DCCBs), Primary Agricultural Credit Societies (PACS)/Farmers Service Societies (FSS)/Large sized Adivasi Multipurpose Society (LAMPS), State Cooperative Agriculture and Rural Development Banks (SCARDBs) and Primary Cooperative Agriculture and Rural Development Banks (PCARDBs).
 
2. We advise that the policy for the year 2018-19 is on the lines of policy circular No. 149 dated 14 June 2017 for the year 2017-18.  
 
3. The operative period of assistance would be from 01 April 2018 to 31 March 2019 and would cover disbursements made by the State Govt. towards share capital contributions during the year 2018-19.
 
4. The above credit facility from NABARD to the State Govt. would be available at 8.5 % per annum or such other rate as may be prescribed by NABARD from time to time.
 
5. While providing the share capital contribution, the State governments may keep the  following in view:
 
(i) Need for promoting member driven cooperative credit institutions
The main objective of providing assistance to State Governments for contribution to the share capital of cooperative credit institutions is to enhance the Maximum Borrowing Power (MBP) of these institutions which is measured in terms of multiples of owned funds, so that these institutions are in a position to undertake larger lending programmes for meeting the credit requirements of their constituents, particularly for agricultural loans.  Further, to make the cooperative credit institutions a truly democratic, member-driven and self-reliant institution, it is desirable to strengthen the member base and also the equity base of these cooperative credit institutions, by increasing the mobilisation of share capital contribution from members.
 
(ii) Realistic assessment of share capital contributions by State Governments
State Governments may provide the share capital to various institutions after realistically assessing the quantum of assistance required taking into account their lending programme and the norms prescribed by NABARD regarding eligibility, ceiling on share capital contribution by State Government etc.
 
6. The State Governments may submit their applications for reimbursement (in the prescribed proforma) complete in all respects well in time to the concerned Regional Office of NABARD in the state within the operative period (April 2018 - March 2019).
 
7. The salient features of the policy are furnished in the Annexure
 
8. Please acknowledge receipt of this circular letter to our Regional Office.
 
Yours faithfully
(Padma Raghunathan)
Chief General Manager
Encls:  4 pages 
 
 
ANNEXURE
 
Policy governing reimbursement of loans by NABARD to State Governments under Section 27 of the NABARD Act, 1981 for the year 2018-19 - Salient features
 
I. Eligibility criteria and ceiling amounts
 
A. State Cooperative Banks (StCBs)
 
(i) NPA norms
 
a. Net NPAs of the StCB not to exceed 10% as on 31 March 2017. In case position improves as on 31 March 2018 the same would be reckoned
b. 5% relaxation in NPA norms is provided to StCBs functioning in the North Eastern Region, Jammu and Kashmir, Sikkim, Himachal Pradesh, Uttarakhand and Andaman & Nicobar Islands.
 
(ii) Ceiling on capital
 
a. The State Government contribution to share capital should not exceed 25% of the paid up capital of the StCB. 
b. The capital infusion in excess of 25% to the total paid up share capital of the StCB by the State Government for which assistance is available be provided as a grant, and kept in a separate account designated as “Capital Convertible Deposit Account”. This amount is eligible for reckoning for CRAR purpose under Tier-I capital.
c. State Governments in NER including Sikkim are allowed as a special case to contribute to share capital of StCB in excess of 25%, only when required to comply with section 11 (1) of B.R.Act,1949 (AACS)
d. No annual cap on quantum of loan for contributing to share capital of StCB.  
(iii)  Compliance with Section 11(1) of B.R. Act, 1949 (AACS)
a.   All licensed StCBs complying with the provisions of Section 11(1) of B. R. Act, 1949 (AACS), will be eligible.
 
B. District Central Cooperative Banks (DCCBs)
 
(i) NPA norms
 
a) Net NPAs of the DCCB not to exceed 10% as on 31 March 2017. In case position improves as on 31 March 2018 the same would be reckoned.
b) 5% relaxation in NPA norms is provided to DCCBs functioning in the North Eastern Region, Jammu and Kashmir, Sikkim, Himachal Pradesh, Uttarakhand and Andaman & Nicobar Islands.
 
(ii) Ceiling on capital
 
a. The State Government contribution to share capital should not exceed 25% of the paid up capital of the DCCB. 
b. The capital infusion in excess of 25% to the total paid up share capital of the DCCB by the State Government for which assistance is available be provided as a grant, and kept in a separate account designated as “Capital Convertible Deposit Account”. This amount is eligible for reckoning for CRAR purpose under Tier-I capital. 
c. No annual cap on quantum of loan for contributing to the Share Capital of the DCCB.
 
(iii)  Compliance with Section 11(1) of B.R. Act, 1949 (AACS)
 
a.  All licensed DCCBs complying with the provisions of Section 11(1) of B. R. Act, 1949 (AACS) will be eligible. As a special case, the unlicensed DCCBs under the revival package of State Govt will also be eligible for assistance.
 
C. Primary Agricultural Credit Societies (PACS)
 
a. The societies should not have overdues exceeding 60% of the demand as on
    30 June 2017 or 30 June 2018, whichever is beneficial.
b. PACS should have been placed under 'A', 'B' or 'C' class under audit classification for the relevant year. The audit of PACS should have been completed at least upto 2015-16 and the State Government concerned should submit a time-bound action plan for clearance of arrears in audit.
c. The State Govt. contribution to Share capital should not exceed 25% of the paid up capital.
d. No annual cap on quantum of loan for contribution to the Share Capital of PACS.
 
D.  Farmers Service Societies (FSS)
 
a. The FSS should not have overdues exceeding 60% of the demand as on 30 June 2017 or 30 June 2018, whichever is beneficial
b. The FSS should have a full time paid Managing Director and at least 3 technical staff/subject-matter specialists on the pattern indicated in the FSS Scheme.
c. The State Govt. contribution to Share capital should not exceed 25% of the paid up capital of the institution.
 
E. Large-sized Adivasi Multi-Purpose Societies (LAMPS)
 
a. The LAMPS should not have overdues exceeding 75% of the demand as on 30 June 2017 or 30 June 2018, whichever is beneficial.
b. LAMPS should have a minimum coverage of 10,000 acres and credit potential adequate for viable operations.
c. The State Govt. contribution to Share capital should not exceed 25% of the paid up capital of the institution.
F. SCARDBs / PCARDBs
a. The SCARDB should not have overdues exceeding 35% of demand as on 30 June 2017 or 30 June 2018, whichever is beneficial.
b. The PCARDB should not have overdues exceeding 50% of demand as on 30 June 2017 or 30 June 2018, whichever is beneficial.
c. The annual ceiling for reimbursement assistance would be Rs. 400 lakh per SCARDB and Rs. 75 lakh per PCARDB, subject to the State Govt. contribution to Share capital not exceeding 50% of the paid up capital of the institutions assisted.
 
II. Other terms and conditions of reimbursement of loan assistance.
 
i. The operative period would be from 01 April 2018 to 31 March 2019. All disbursements made by the State Govt. during the year 2018-19 would be eligible for reimbursement under the scheme.
 
ii. Assistance reimbursed is repayable within a period of 12 years.
 
iii. The principal is repayable in ten equal annual installments commencing from the third year of drawal as on 1 April and 1 October irrespective of the date of drawal as under :
 
Drawals made Due date
 
01 April to 30 September 1 April
 
01 October to 31 March 1 October
iv. The loan reimbursed will carry interest at 8.50 % per annum or such other rate of interest as may be specified by NABARD from time to time.
 
v. The interest is payable at the end of each half year as on 01 October and 01 April or when the loan is fully repaid.
 
vi. In the event of default in repayment of principal and /or payment of interest, the State Government 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. The penal interest rates are subject to revision from time to time.
 
vii. While the Net NPA level/ recovery performance of beneficiary institutions would form the basis for provision of assistance, the quantum of assistance for each type of credit institutions would be based on the projected realistic volume of business.
 
viii. It would be necessary for the State Govt. to furnish a copy of the order of Govt. of India's consent in terms of clauses (1) and (3) of Article 293 of the Constitution of India, for borrowing the amount of reimbursement assistance reimbursable by NABARD. Further, a certificate stating that the amount to be reimbursed is within the limits, if any, fixed by the State Legislature for the borrowings by the State Govt., would also be required to be submitted at the time of submitting the application for reimbursement of assistance.
 
ix. State Government is required to submit a statement indicating the details of contributions made by them towards the share capital of cooperative credit institutions at the time of seeking reimbursement assistance. The proforma A,B,C,E,F,L, and N of the loan application is slightly modified. The word ‘Government Contribution applied for’ may be replaced by ‘Date and amount of Govt. contribution made and amount applied for’ in the loan application by State Govt.
 
x. At the time of availing the drawal, State Govt. may submit a statement indicating the amount of the share capital contribution made and the date on which the same has been received by various agencies.
 
III. General
 
     In the case of StCBs, DCCBs, SCARDBs and PCARDBs, the audit of the concerned institutions should not be in arrears and should have been completed at least upto the year 2016-17.  In the case of other institutions viz., PACS, FSS, and LAMPS audit of the concerned institutions should have been completed at least upto 2015-16 for provision of assistance during 2018-19 and the State Government concerned should submit a time-bound action plan for clearance of arrears in audit.