Ref. No. NB.DoR / 208 / A1-(ST Others) / 2018-19
11 April 2018
Circular No. NB. 70 / DoR- 16 / 2018
1. The Chairman
All Regional Rural Banks
2. The Chairman and Managing Director
All Sponsor Banks of Regional Rural Banks
Provision of Short term refinance by NABARD to Regional Rural Banks for financing various purposes under Short Term (Others) - Policy for the year 2018-19
Please refer to our circular No. NB.DoR /4926 / A1-(ST Others) / 2016-17(Circular No. NB 83 /DOR- 19 /2017) dated 31 March 2017 communicating NABARD's policy for the year 2017-18 for sanction of consolidated ST (Others) limits to Regional Rural Banks (RRBs) under Sec. 21(1)(i)(iv)(v) read with Sec 21(4) of the NABARD Act, 1981, for financing marketing of crops, pisciculture and certain approved purposes other than SAO on the basis of Realistic Lending Program for respective purposes.
2. The policy has since been reviewed and RRBs with Net NPAs upto 6% will be eligible for refinance for the financial year 2018-19. The governing provisions of ST (Others) refinance by NABARD during 2018-19 are furnished in Annexure I. The assessment norms hitherto followed for different purposes would continue mutatis mutandis as indicated in Annexure-II.
3. The following purposes are also eligible for refinance under Bonafide Commercial or trade transactions (as contained in Section 21(1)(iv) of the NABARD Act, 1981) :
i) ST Loans for working capital requirements of professionals and Self employed
ii) ST Loans for working capital requirements of Annual Maintenance for SRTOs
iii) ST Loans > Rs.50000 against gold for non agri purposes/bonafide trading etc (Purely for loans other than consumption purposes)
4. Refinance is also available for ST Loans for working capital requirement of Social infrastructure projects.
5. Micro-enterprises, small enterprises and medium enterprises have been included in terms of amendment to NABARD Act, 1981.
6. Refinance assistance, from NABARD to RRBs will be available at an interest rate which will be prescribed by NABARD, from time to time.
7. RRBs may arrange to forward their applications for sanction of ST (Others) credit limits as per the revised proformae, complete in all respects, to the concerned Regional Offices of NABARD immediately, to facilitate timely sanction of limits for the year 2018-19.
Please acknowledge receipt of this circular to our respective Regional Office.
Chief General Manager
Encls.: 8 pages
General Terms and Conditions - RRBs
1. Operative period of ST (Others) limit
The operative period of ST (Others) limit for the year 2018-19 would be from 01.04.2018 to 31.03.2019.
2. Sanction of consolidated limit
A consolidated limit under ST (Others) will be sanctioned to RRBs for financing marketing of crops, fisheries sector, for financing Bonafide Commercial or trade transactions, production and marketing activities of artisans (other than handloom weavers) and village / cottage / tiny sector industries, for financing persons belonging to the weaker sections (as defined by the RBI vide its circular no. RBI / 2007-08 / 121 RPCD RRB.BC.20 / 03.05.33 / 2007-08 dated 22.08.2007) and engaged in trade / business / service activities including distribution of inputs for agriculture and allied activities. Composite term loans provided for these purposes (which are otherwise eligible under the Automatic Refinance Scheme of NABARD) are not eligible for refinance under ST (Others) credit limits.
The limit sanctioned for 2018-19 will be inclusive of the amount outstanding against the sanction for the year 2017-18 or any outstanding against the limit prior to 2017-18.
3. Eligibility norms
Audit of RRBs should have been completed for the year 2016-17 and the relative audit reports together with financial statements received by NABARD. Wherever, audit for 2016-17 is completed and report available, the same may be submitted together with financial statements. Further the audit of the RRBs as on 31.03.2018 should be completed by 30.06.2018.
3.2 Compliance of CRAR
CRAR should be 9% or more as on 31.03.2017. RRBs with CRAR less than 9% as on 31.03.2017 but more than 9% as on 31.03.2018 would also be eligible.
3.3 NPA norms
(i) RRBs having net NPAs upto 6% will be eligible for refinance. However, with a view to increasing the credit flow in the North Eastern Region, Jammu & Kashmir, Himachal Pradesh and Uttarakhand, the net NPA norms may be relaxed by 5% in these States.
(ii) In case of merged banks, the financial position of the new / merged RRBs as on 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 limits to RRBs for the year 2018-19.
4. Credit limits for financing ST - Marketing of crops, fisheries sector and certain approved purposes (others)
RRBs may indicate their credit limit requirements for marketing of crops, fisheries sector and for financing production and marketing activities of artisans (other than handloom weavers) and village / cottage / tiny sector industries, for financing Bonafide Commercial or trade transactions, for financing persons belonging to the weaker sections (as defined by the RBI vide its circular no. RBI / 2012-13 /85 (RPCD CO.RRB.BC.No. 06 / 03.05.33 / 2012-13) dated 02.07.2012 and engaged in trade / business / service activities including distribution of inputs for agriculture and allied activities separately in the consolidated credit limit applications and maintain separate books of account and Demand Collection Balance (DCB) registers in respect of loans provided under the above programs.
5. Quantum of refinance from NABARD
NABARD will sanction consolidated credit limits to RRBs to the extent of 100% of their realistic lending program for eligible purposes. (Marketing of crops / fisheries sector / certain approved purposes other than SAO). Banks would assess their realistic lending program as per the guidelines prescribed for each activity. The RLP may be reckoned as loans issued during previous year under all purposes put together with a reasonable increase (average increase during last 3 years). In case there is no disbursement during previous years, banks would assess their RLP as per the guidelines indicated in Annexure - II. Drawal may be allowed for a period of 12 months irrespective of the purpose.
6. Operational discipline
(i) The drawals made on the credit limits are repayable on demand. However, each drawal under the limit may be allowed to run for a maximum period of 12 months.
(ii) RRBs can make drawals against sanctioned limits on the basis of aggregate NODC i.e. for all the purposes taken together. For sub-limit wise shortfall in NODC, no penal interest would be charged if overall NODC is available. Separate NODC has to be maintained by the banks under each purpose. RRBs are required to furnish to the concerned RO of NABARD, monthly NODC statements indicating the purposes in the format prescribed vide annexure to circular No. NB.PCD (OPR) / 662(A) / A.137(Spl.) / 1999 -2000 dated 26.05.1999 (as modified from time to time) so as to reach ROs by 20th of the succeeding month.
(iii) Drawals by RRBs will be subject to the condition that the outstanding borrowings including the current drawal permitted do not exceed the NODC available as on the last Friday of the preceding month. In addition, at the time of each drawal, a certificate in the prescribed format regarding the availability of NODC will have to be furnished.
(iv) RRBs should make good the deficit in NODC immediately, so as to ensure availability of adequate non-overdue cover for borrowings from NABARD. In case, such deficit is not regularized within one month from the date of occurrence of such deficit, the RRB concerned would have to pay additional interest at 1% on the amount of deficit in NODC for the duration of deficit till the position is regularized.
7. Bifurcation of principal and interest in the loans outstanding
As hitherto, RRBs may continue to exclude the interest component (including overdue interest) from the outstanding amount and report principal loans separately, both in their applications for credit limits and drawal applications, for arriving at the eligibility for refinance support from NABARD. Besides, as hitherto, only the principal portion of loans (issued, recovered, outstanding and overdues) may be reported in the monthly NODC statements.
8. Rate of interest on refinance
(i) Banks may charge reasonable rates of interest on their advances to the ultimate borrowers keeping in view the directives of RBI on the deregulation of lending rates of banks, their transaction cost, risk cost etc.
(ii) Refinance assistance, from NABARD to RRBs will be available at such rate which may be prescribed by NABARD from time to time. (at present the rate of interest is 7.7 % p.a.)
(iii) Interest is payable at half yearly rests on 01 October and 01 April every year, as hitherto.
9. Clearance of defaults
(i) 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 refinance facility from NABARD. Resumption of refinance may be considered only after the bank clears the default.
(ii) In the event of default in repayment of principal and payment of interest, the RRBs will be liable to pay to NABARD penal interest of 2% over and above the interest rate at which refinance was disbursed on the defaulted amount and for the period of default. The penal interest rates are subject to revision from time to time.
10. Right to inspection
NABARD reserves the right to inspect / get inspected the books of accounts of the banks.
11. Right to cause special audit
NABARD would have the right to cause special audit of the books of accounts and other relevant material of the bank either by itself or through other agency 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.
Assessment norms for eligible activities for provision of refinance assistance from NABARD under ST (Others) - RRBs
(A) Marketing of crops
1.1 Affording reasonable opportunities for a remunerative price to the growers for their produce by enabling them to hold on to their produce for the time being.
1.2 Facilitating recovery of production loans out of the loans provided for marketing of crops against pledge of agricultural produce and / or from purchase price payable for agricultural produce.
2.1 Advances against pledge of agricultural produce belonging to farmers kept in own / hired godowns, private godowns / cold storage units / warehouses, cold storage units or warehouses of Central / State Warehousing Corporations and Agricultural Produce Marketing Committees.
2.2 Crops include food grain crops, cash crops, plantation and horticultural crops.
2.3 PDS and procurement schemes of Central / State Governments will be outside the purview of the Scheme.
2.4 The Scheme is applicable only to the bonafide cultivator farmers. Traders, businessmen, commission agents etc. are not eligible to be covered under the Scheme.
3. Eligible borrowers
All farmers engaged in Seasonal Agricultural Operations including horticultural and plantation crops, irrespective of whether or not they have availed production credit from the banks.
4. Quantum of credit (Realistic Lending Program)
4.1 Loan shall not exceed 75% of value of actual produce pledged subject to a ceiling of ₹ 10.00 lakh per farmer.
4.2 The value of actual produce pledged may be determined on the basis of prevailing market price or the minimum procurement price announced by the Government, whichever is less.
4.3 Banks will have to recover the outstanding production credit, if any, from the loan granted for marketing of crops.
Usual margin of 25% on the pledge loans to individual farmers.
6. Refinance assistance to banks
6.1 Refinance assistance will be available under Sec. 21(1)(i) read with Sec. 21(4) of the NABARD Act, 1981 against promissory notes of RRB subject to the Bank furnishing a declaration in writing, setting out the purpose for which they have made loans and advances (and such other particulars as may be required by NABARD).
6.2 Advances to farmers against pledge of agricultural produce are not to be treated as cover for borrowings made for financing Seasonal Agricultural Operations (SAO) and vice versa, since separate credit limits are sanctioned for SAO and marketing of crops to banks by NABARD.
7. Other terms and conditions
7.1 Banks shall insist on the following from the borrowers:
- that the produce pledged is adequately insured against the risk of fire, theft, etc.
- that the produce is easily identifiable and accessible;
- undertake such measures which will ensure proper storage, custody, safety as well as quality of the produce pledged.
7.2 Sanction of loans for marketing of crops against pledge of agricultural produce will be subject to compliance with the Selective Credit Control Directives of the RBI, if any.
7.3 In order to ensure effective end-use of the credit, banks would have to undertake necessary precautions like sanction of loans for marketing of crops against pledge of agricultural produce after harvest, during the marketing season and such loans are generally liquidated during the marketing season of crops for which they have been sanctioned.
7.4 Banks shall ensure that the goods pledged to them, are stored in the proper and safe godowns / cold storages / warehouses. The produce pledged to the Bank should be in its effective custody.
7.5 Banks shall release the entire / proportionate share of produce pledged to the farmers promptly, after the full / partial repayment of loans for marketing of crops.
7.6 Banks should maintain at monthly intervals, statement of stock pledged and all such statements should be kept on record with the banks and the same are available for verification by NABARD as and when required.
7.7 Banks will have to put in place system for effective supervision and inspection, which will ensure the safety and quality of produce pledged. The verification of the produce pledged may be done by the Bank staff periodically, as may be necessary.
(B) Fisheries Sector
1. Scope of refinance
To provide short-term credit limits to RRBs for financing the working capital requirements of individual fisherman /group of fishermen.
2. Borrowers of bank finance
Individual fishermen / group of fishermen (both inland and marine).
3. Eligible activities for provision of bank credit
3.1 As per existing guidelines on project formulation and financing under investment credit, the operational cost / recurring cost for first operational cycle, is included in the capital cost and is capitalized. Further, surplus generated during first year should be generally sufficient for meeting subsequent recurring expenditure. On the other hand, borrowers who have availed of investment credit from banks may be requiring credit for subsequent increased working capital operations. Further, the fishermen not availing investment credit from banks may also need working capital assistance. In view of this, while extending working capital finance, the banks may ensure that credit requirements are realistically assessed and only genuine credit requirements are financed by them as per scales of finance recommended by the District Level Technical Committee (DLTC).
3.2 The following activities would be eligible for financing by banks:
(i) Inland fisheries aquaculture such as: Fish Culture, Fish Seed Hatchery, Reservoir Fisheries, Integrated Fish Farming, Fresh Water Prawn Farming, Fresh water Prawn Hatchery, Ornamental fish breeding and farming.
(ii) Brackish water aquaculture such as: Brackish Water Shrimp farming, Brackish Water Shrimp Hatchery, Brackish Water Fish Farming, Brackish Water Fish Hatchery
(iii) Marine Fisheries Aquaculture (Mariculture), edible oyster / pearl oyster culture, Mussel culture, Sea Weed Culture, Fin Fish culture,
(iv) Inland / Marine Capture Fisheries
3.3 An illustrative list of items that would be considered as part of working capital is given in the Appendix for guidance of the banks.
4. Quantum of credit from banks (Realistic Lending Program)
4.1 As per the scale of finance that may be fixed for the purpose by the District Level Technical Committee.
4.2 Off-Season Credit: While the quantum and periodicity of off-season credit may be fixed by the DLTC as a part of scale of finance, it should be ensured that the off-season credit is disbursed only to those whose annual income does not exceed the limit fixed for the identification of families below poverty line (BPL families) under SGSY. Banks should also ensure that off-season credit sanctioned to individual fishermen (through societies) are within the ceilings prescribed by RBI for sanction of consumption credit to individual borrowers by banks / societies. Care may be also taken to see that the off-season credit is provided only to the extent of meeting the consumption needs during such period and the beneficiaries are in a position to repay off-season credit during the fishing season from the sale proceeds of catch from fishing operations.
4.3 The quantum and periodicity of credit may be realistically assessed taking into account the duration of voyage, composition of groups of fishermen, sizes and types of vessels etc. in case of capture fishing; the peak and off-seasons of operation and normal breeding seasons in case of hatcheries; the marketing periods in case of culture fishing etc.
5. Periodicity of credit
5.1 At bank-level, cash credit limit for one year (April - March) may be sanctioned to individual fishermen / group of fishermen based on the scale of finance, with flexibility to operate the account as and when required. Further, there should be adequate arrangements for ensuring that the proceeds from sale of catch are remitted to the cash credit account by the borrower.
5.2 During the off season, drawals may be allowed only to the extent of the off season credit sanctioned.
6. Renewal of cash credit accounts to fishermen
Cash credit limits may be renewed, provided the operations in the accounts are satisfactory, no drawal is outstanding for more than 12 months and the total repayments made are not less than the maximum amount of outstanding reached under the credit limit during the year.
7. Coverage under Kisan Credit Card Scheme
Considering that the credit facility will be in the nature of cash credit, banks may consider issuing credit cards on the lines of Kisan Credit Card Scheme to Individual fishermen / group of fishermen and extend credit to them under such cards. The instructions issued to RRBs under the KCC Scheme will be, mutatis mutandis, applicable to credit cards issued by the banks to fishermen. Such details may be shown separately in the NODC statements in the revised format as per circular No. NB.PCD (OPR) / 662A / A.137(Spl.) / 1999-2000 dated 26.05.1999.
Banks may take such security from Individual fishermen / group of fishermen respectively as may be appropriate and necessary, as per the guidelines issued by the RBI in this regard. In case arrangements for sale of catch through primary or central or regional cooperative fisheries societies exist, arrangements may be made for ensuring that the proceeds from sale of catch are remitted to the cash credit account by entering into an agreement with the society and the borrowers as also obtaining an undertaking from the borrower to sell the catch through the concerned society.
(C) Other approved purposes
(i) Financing production and marketing activities of artisans (other than handloom weavers) and village / cottage / tiny sector industries,
(ii) Working capital for Micro, small and medium enterprises
(iii) Working capital for social infrastructure projects
(iv) For financing Bonafide Commercial or trade transactions
(v) For financing persons belonging to the weaker sections (as defined by the RBI vide its circular no. RBI / 2013-14 / 97 (RPCD RRB.BC. No. 07 / 03.05.33 / 2013-14) dated 01.07.2013 and engaged in trade / business / service activities including distribution of inputs for agriculture and allied activities.
Composite -term loans provided for these purposes (which are otherwise eligible under the Automatic Refinance Scheme of NABARD) are not eligible for refinance under ST (Others) credit limits.
Purposes eligible to be covered under fisheries sector / fishery activities (Illustrative)
(I) Inland fisheries aquaculture
(a) In case of fish culture - fish seed, transportation, lime, organic / inorganic fertilizers, lease rent, supplementary feed, fishing charges, miscellaneous expenses including watch and ward, insurance etc.
(b) In case of fish seed hatcheries -
(i) purchase of brooders, inorganic / organic fertilizers, supplementary feed, wages for skilled and semi-skilled fishermen, operational cost of pump sets / generators, cost of periodical netting, watch and ward, pituitary glands or other inducing hormones, replacement of lab equipment, oxygen cylinder and packing material for fish seed, transportation / marketing expenses, miscellaneous expenditure including insurance.
(ii) If only rearing of fish seed by purchasing of spawn from the hatcheries is resorted to - cost of purchase of spawn, lease amount for ponds taken on lease, manure, supplementary feed, harvesting and marketing expenses.
(c) In case of reservoir fisheries - seed money, fishing implements like nets, funds for stocking seeds etc.
(d) In case of fresh water prawn farming - prawn seeds, prawn feed, chemicals and manure for pond preparation, fuel and electricity, staff salaries including labour harvesting, miscellaneous expenses including insurance, medicines etc.
(e) In case of fresh water prawn hatchery - purchase of brooders, fertilizers, wages of skilled and semi-skilled labourers, operational cost of pump sets, packing, transporting, insurance etc.
(II) Brackish water aquaculture
(a) In case of Brackish water shrimp / fish farming – shrimp / fish seed, fertilizers / manure, supplementary feed, operational cost for pump set, electricity charges, miscellaneous including insurance, labour, harvesting, medicines etc.
(b) In case of Brackish water shrimp / fish Hatchery - purchase of brooders, fertilizers, wages of skilled and semi-skilled labourers, operational cost of pump sets, packing, transporting, insurance etc.
(III) Marine aquaculture (Mariculture)
(a) In case of edible oyster / pearl oyster - repairs and maintenance of rafts, operation
of boats, labour, oyster seeds, harvesting, etc.
(b) In case of mussel culture - cost of spats, labour, operation of boat etc.
(c) Consumption credit to meet the off season requirements of the members of the PFCS.
(IV) Inland / Marine capture fisheries
(a) In case of country boats – Repairs / maintenance/ replacement of engine, gears and other equipment; In case of mechanized boats - minor repairs of engine, gears and other equipment.
(b) Wages for crew, diesel oil, mobil oil, ice, other provisions etc.
(c) Consumption credit to meet the off season requirements of the members of the PFCS.