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to believe, based on preliminary analysis, that the objectives of improving
rural infrastructures and the credit absorbing capacities of under-developed
regions with the help of RIDF resources were not being achieved in the initial
period.
Subsequent to the RIDF XI, NABARD claims that “the RIDF funds
under ongoing tranches are more judiciously distributed across states, with a
larger share going to the less developed and NE states” (NABARD 2012, p.40).
As depicted in Table 6.10, the share of the eastern region in disbursements,
which was 12% in the RIDF I-XI phase, has improved to 16% in the subsequent
period. Within the eastern region, it is Bihar which has experienced a noticeable
improvement from 0.8% to 3.2% as between the two phases. Correspondingly,
the shares of the western and southern regions have slipped from 22.2% to
15.5% and from 30.1% to 26.7%, respectively.
Moderate Interest Rates Offered on RIDF Deposits and In Turn on Loans
to State Governments
The structure of interest rates on banks’ RIDF deposits and in turn
on infrastructure loans therefrom to state governments, has varied from
time to time. Certain principles seem to have been adopted most of the time,
though there have been exceptions in some years. On the deposit side, the
principle involved was that of a degree of punitiveness for banks because of
their failure to fulfil the priority sector targets. Hence, the interest rates offered
to banks could not be too attractive for them to ignore their social obligations.
On the lending side, the rates on loans charged had to ensure the viability of
infrastructure projects. But, it is not known if in the operation of the RIDF
interest rate structure, any social-cost benefit analysis at the micro level has
ever been undertaken so as to apply appropriate interest rates. Considering
the enormity of infrastructure gaps and the expected vast economic and social
benefits, the interest rate structure reflected the policy rate even when the rate
was high in the initial phase of the RIDF operations.
As depicted in Table 6.11, the rates on RIDF deposits began with a 12%
Bank rate which got gradually reduced to 6% in April 2003. During this period
from 1995-96 to 2002-03, RIDF deposits earned a flat rate as per the Bank
rate. From then on for six years 2003 to 2008-09, there was a graduated rate
offered inversely related to the shortfall in priority sector targets. Thereafter,
again, a flat rate at the Bank rate has been offered to RIDF deposits.
What is significant is that in recent years after introducing reforms in
interest rates by the RBI, the Bank rate has been drastically reduced to 6% and
