Credit facility to Federations

1. Introduction
The marketing federations and cooperatives are playing a very important role in agribusiness and value/supply chain management of the various agricultural commodities including milk. The 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. and 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.

2. Eligible Institutions

The following institutions will be eligible for funding under CFF
  1. State/Central Govt. Agricultural Marketing Federations, Corporations.
  2. Dairy Co-operatives/Federations
  3. Agriculture Marketing Co-operatives/Federations
  4. Registered Companies
3. Eligibility Criteria

The broad eligibility criteria for borrower entity for availing funding under CFF

3.1 State/Central Govt. Agricultural Marketing Federations, Corporations
  1. 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.
  2. Earned profit during the last three years and not having accumulated losses.
  3. The entities with poor financials will be considered based on the merit of the proposal and backed with Govt. Guarantee.
3.2. Dairy and Agriculture Co-operatives and Federations
  1. It must be a registered body
  2. Earned profit during the last three years and not having accumulated losses
  3. Professional  Management and democratic setup
  4. Audit of accounts is regular
  5. With no history of defaults in repayment of loans.
3.3. Registered Companies

  1. It must be a registered body under Companies Act.
  2. Earned profit during the last three years and not having accumulated losses
  3. Professional Management
  4. The minimum credit rating of the promoting company should be at 'AA' by CRISIL or CARE.
  5. With no history of defaults in repayment of loans.

4. Nature of Loan

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

5. Eligible Activities

  1. Procurement and marketing of agricultural commodities
  2. Processing and marketing of agricultural commodities
  3. Procurement, processing and marketing of milk
  4. Supply of Agricultural inputs including animal feed

6. 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:

Type of beneficiary

Quantum of limit ( ST)

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

  1. 100% for the procurement operations under decentralised procurement operations of food grains and Minimum Support Price (MSP) Scheme.
  2. 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

7. Rate of interest

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

8. Security for Loan

The security requirement will be depended 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, receivable and book debts. Additional collaterals in the form unencumbered assets, fixed deposits, Guarantees etc., will be insisted depending on the borrowing entity and purpose of limit.

9. 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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