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Credit Facilities to Marketing Federations

Marketing federations and cooperatives are playing a very important role in agribusiness and value/supply chain management of the various agricultural commodities. Major activities undertaken by these institutions are:

  • Procurement of agricultural commodities including milk
  • Aggregation, storage and value addition in few select commodities like milk etc.
  • Marketing

Large number of farmers, producers’ organizations, and primary societies depend upon these institutions for marketing of their produce and for value-added services like input supply, value addition and storage facilities. The marketing operations by these federations and cooperatives require seasonal and timely short-term credit facility to support their day-to-day operations.

Eligible Institutions

The following institutions will be eligible for funding under Credit Facility to Federations (CFF)

I. State/Central Govt. Agricultural Marketing Federations, Corporations
II. Dairy Co-operatives/Federations
III. Agriculture Marketing Co-operatives/Federations
IV. Registered Companies

Eligibility Criteria

Broad eligibility criteria for borrower entity for availing funding under CFF is as under:

I. State/Central Govt. Agricultural Marketing Federations, Corporations

  • It must have been established or constituted by or under any Central Act, or State Acts and major share of the paid up capital is held or controlled by the Central / State Government
  • Earned profit during the last three years and not having accumulated losses
  • Entities with poor financials will be considered based on the merit of the proposal and if backed with Government Guarantee

II. Dairy and Agriculture Co-operatives and Federations

  • It must be a registered body
  • Earned profit during the last three years and not having accumulated losses
  • Professional Management and democratic setup
  • Audit of accounts is regular

III. Registered Companies

  • It must be a registered body under Companies Act
  • Earned profit during the last three years and not having accumulated losses
  • Professional Management
  • The minimum credit rating of the promoting company should be at 'AA' by CRISIL or CARE
  • Should not have a history of defaults in repayment of loans

Nature of Loan

Short-term credit facility (less than 12 months) for meeting working capital requirement. The limit can be operated for 12 months and the outstanding at the end of 12th month is required to be repaid.

Eligible Activities

  • Procurement and marketing of agricultural commodities
  • Processing and marketing of agricultural commodities
  • Procurement, processing and marketing of milk
  • Supply of Agricultural inputs including animal feed

Quantum of Loan and Margin/ borrower contribution

Loan and Margin/Borrower's contribution will be as per the guidelines issued by RBI from time to time. The quantum of loan depends upon the type of beneficiary and nature of loan as given below:

I. State/Central Govt. Agri Marketing Federations, Corporations

  • 100% for the procurement operations under decentralised procurement operations of food grains and Minimum Support Price (MSP) Scheme
  • 90% for other marketing interventions

II. Dairy Co-operatives/Federations/ Agri. Marketing Co-operatives/Federations and Registered Companies

Maximum of 75% of the working capital assessment. The following method will be adopted for assessing the working capital :
WC = Total Current Assets - Current liabilities other than bank borrowings and finance *75%. Borrower will bring in minimum of 25% margin.

Rate of interest

The rate of interest will be as per the rate decided by the Asset-Liability Management Committee (ALCO) of NABARD. Further, interest is dependent upon the type of borrower, type of security offered, availability of guarantee, type of project, credit rating of the entity and the prevailing market conditions. Interest will be due and paid at monthly rests for short term loans. Interest rate is linked to the risk rating.

Security for Loan

The security requirement will depend upon the rating of the borrowing entity, type of operations etc., and as per requirements/stipulations laid down by RBI from time to time. The primary security would be hypothecation of assets, stocks, receivables, and book debts. Additional collaterals in the form of unencumbered assets, fixed deposits, guarantees etc., will be insisted depending on the borrowing entity and purpose of limit.

Appraisal Fee upfront fee

Appraisal fee/upfront fee charged from the promoter will be specific to the proposal and the maximum fee would be restricted to 1% of the project cost. The power to waive the fees rests with the sanctioning authority.

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