183
funds, separate allocation from bank funds for the Bharat Nirman component
has been discontinued since 2010-11
20
.
And the source of the allocations has remained the same, namely
“contribution by commercial banks on the basis of their shortfall in achieving
the target of 18% for agriculture under priority sector. Interest is paid to banks
by NABARD at the Bank rate and it is inversely related to the level of shortfall”
(NABARD 2010, p.19)
21
. As the Budget Speech of 2011-12 (p.8) has affirmed,
“RIDF is an important instrument for routing bank funds for financing rural
infrastructure”
22
.
This is a classic case of public policy taking advantage of the double
coincidence of (a) the availability of the potential investible funds because
of banks’ failure to fulfil the priority sector targets, and (b) large numbers
of infrastructure projects at the rural level getting delayed or not getting
implemented for want of funds at the states level.
As described in the Government of India’s Economic Survey of 2008-09,
“The domestic scheduled commercial banks (DCBs), both in the public and
private sector, which fail to achieve the priority sector and/or agriculture lending
20
It was also announced that certain other funds will be set up with NABARD and other
institutions: Short-Term Cooperative Rural Credit (STCRC) (Refinance) Fund with a corpus of
`
5,000 crore; SIDBI (corpuses of
`
2,000 crore each for Micro Small and Medium Enterprises
(Refinance) Fund; and MSME (Risk Capital) Fund; NHB (Rural Housing Fund with a corpus of
`
1,200 crore) from contributions by SCBs which failed to achieve their obligation to lend to
the priority sector. These funds were set up with the concerned agencies, with contributions
from domestic banks which had not achieved their target in lending to the priority sector and/
or agriculture as on the last reporting Friday of March 2008, in June 2008 and the bank-wise
allocations for depositing in these Funds were once revised in August 2008. The revised corpus
allocations were:
`
10,000 crore for RIDF-XIV,
`
4,000 crore for the separate window under RIDF-
XIV for rural roads component of Bharat Nirman Programme and
`
5,000 crore for Short-Term
Cooperative Rural Credit (STCRC) (Refinance) Fund with NABARD;
`
1,600 crore for Micro, Small
and Medium Enterprises (MSME) (Refinance) Fund and
`
1,000 crore for MSME (Risk Capital)
Fund with SIDBI; and
`
1,000 crore for Rural Housing Fund with NHB. The balance portion
(
`
4,000 crore) of the corpus of RIDF-XIV shall be allocated to SCBs on the basis of shortfall
in achievement of priority sector lending target/sub-targets as on the last reporting Friday of
March 2009 (The Government of India’s
Economic Survey
2008-09
,
p.100). Two additional
allocations have been made in the last two budget speeches: (i)
`
10,000 crore as contribution
to NABARD’s Short-Term Rural Credit Fund for 2011-12 from the shortfall in priority sector
lending by scheduled commercial banks; and (ii) A Short-Term RRB Credit Refinance Fund has
been set up in 2012-13 by allocating
`
10,000 crore to NABARD for refinancing RRBs through
this Fund so that their capacity to disburse short-term crop loans to the small and marginal
farmers is enhanced.
21
As explained subsequently, interest rates have varied from period to period.
22
The latest Budget Speech for 2013-14 writes: “RIDF has successfully utilized 18 tranches so
far. I propose to raise the corpus of RIDF-XIX in 2013-14 to
`
20,000 crore (p.9).
