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Second, once the size of the tranche is indicated by the Finance
Minister, the RBI apportions the required contributions amongst the scheduled
commercial banks in proportion to the extent of their relative shortfall in the
priority sector target for agricultural lending subject to a maximum of 1.5%
of net bank credit
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. The amount of contribution thus worked out by RBI for
a bank in respect of each tranche of RIDF, becomes the concerned bank’s
potential burden of funds for which NABARD may place demand on the bank
depending upon the anticipated disbursements of loans to state governments
and government-owned corporations, again in proportion to the share of each
bank in the consortium. Now, the NABARD places this demand on banks only
when there is in sight a specific infrastructure project ready for financing. Such
a tight-rope arrangement is an essential condition for the RIDF operations,
for the NABARD as an intermediary has no any other way of earning on funds
so obtained from banks than by lending to state governments for which the
scheme is meant. Also, the margin on the funds between interest rate paid by
NABARD and that paid by state governments is kept very low, just fractional
at one-half of a percentage point. The novelty of this creative idea of RIDF lies
in what was specified in the Union Budget Speech of 1995-96 when the first
tranche was set up; that is: “The loans will be on a project-specific basis with
repayment and interest guaranteed by the concerned state government”.
Finally, when NABARD calls upon individual banks to participate in the
consortium of a specific RIDF tranche, banks deposit the relevant amount with
NABARD. It is at this stage that a given RIDF tranche begins to operate. These
deposits are not in the form of Corpus which can be utilized for any purpose.
Individual bank deposits given by banks to NABARD are project-specific and
they are lent to state governments against pre-determined projects. When the
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The corpuses are only government’s intentions of setting a limit of RIDF size each year. There
is no question of any government provision in the budget for this purpose. The RIDF is created
entirely out of the deposits given by banks from out of the shortfall in their priority sector
targets. Therefore, one is surprised at the following claim made by the RBI in its
Report on
Trend and Progress of Banking in India
2009-10
(p.132):
“RIDF is one of the most important schemes entrusted with NABARD by the government of
India to increase flow of credit for the development of rural infrastructure. The fund was set
up in 1995 with an initial corpus of 2,000 crore. Apart from contributions of the Government
of India, RIDF also receives deposits from commercial banks to the extent of shortfall in their
lending to agriculture. As at end-March 2010, out of the total funds received by RIDF since its
inception both from the Government of India as well as via deposits, more than half was from
contributions by the Government of India”.
This is patently incorrect. As explained below, the GoI makes no contribution to RIDF.
Accordingly, the tabular data published by the RBI in this respect in the same RBI publication
is quite misleading.
