Ref. No. NB.DoR / 3204 / PPS - 9 / 2018-19
25 March 2019
Circular No. 77/DoR - 23 / 2019
The Managing Director
All State Cooperative Banks
Madam/ Dear Sir
Refinance Policy for Schematic Lending for F. Y. 2019-2020 - State Cooperative Banks (StCBs)
Refinance Policy for Schematic Lending for the year 2019-2020 for State Cooperative Banks is finalized and enclosed herewith. This Policy supersedes all the existing policies in this regard.
2. The Circular is also available on NABARD website www.nabard.org under the tab information Centre.
3. Please acknowledge receipt.
Chief General Manager
Encls : 7 pages
Refinance Policy for Schematic Lending for F. Y. 2019-2020
NABARD has been providing long-term refinance to the approved financial institutions under the provisions of Section 25(i)(a) of NABARD Act, 1981 to supplement their resources for providing adequate credit for taking up investment activities in agriculture, allied activities and rural Off-farm sector etc.
2. The objectives of providing long-term refinance are as under:
? Supporting capital formation in agriculture thereby promoting growth of agriculture sector.
? Directing flow of credit for promotion of thrust activities.
? To meet the credit requirement of JLGs and SHGs.
? Promoting alternate employment opportunities in rural areas by supporting Off-farm sector activities
3. Nature of Accommodation
Refinance assistance is provided to the banks in respect of their disbursement for various purposes under the following two windows.
3.1 Automatic Refinance Facility (ARF)
Automatic Refinance Facility (ARF) enables banks to obtain financial accommodation from NABARD, without going through the detailed procedure of pre- sanction formalities. Banks are expected to appraise the proposals at their own level and finance the borrowers. Banks then claim refinance from NABARD on the basis of a declaration (drawal application), indicating the various purposes for which refinance has been claimed and the loan amount disbursed. In such cases, the sanction and disbursement of refinance are attended to simultaneously by NABARD.
Automatic Refinance Facility is extended without any upper ceiling of quantum of refinance, bank loan or Total Financial Outlay for all kinds of projects under Farm Sector (FS) & Off-Farm Sector .
If the banks intend to avail refinance under pre sanction procedure they are required to submit the projects for approval of NABARD. Before sanction of the same, NABARD appraises these projects to determine its technical feasibility, financial viability and bankability.
4. Eligibility criteria
4.1. Eligibility criteria for drawal of refinance from NABARD are reviewed from time to time. The eligibility criteria prescribed for the year 2019-2020 are as under:
a) StCBs complying with CRAR of minimum 9.00% will only be considered for granting refinance. In case of DCCBs with less than 9.00% CRAR, no refinance will be available to individual StCBs on behalf of such DCCBs.
b) Net NPAs not exceeding 20% of net loans and advances outstanding. Further the NPA position will be reckoned for the bank as a whole.
c) The bank should be in net profit.
d) StCBs/CCBs with ‘A’ or ‘B’ audit class classification only are eligible.
4.2 Eligibility criteria and Risk Assessment during 01 April 2019 to 30 September 2019 will be based on their audited financial position as on 31.03.2018 or 31.03.2019 (if audited position as on 31.03.2019 is available). From 01 October 2019 to 31 March 2020, the same will be based on their audited financial position as on 31.03.2019. Sanction and Drawals on or after 01 October 2019 will be permitted only to such StCBs, which have completed the audit and submitted the relevant audit report to the concerned RO of NABARD.
4.3 In the event of any variation in the financial parameters as indicated in the audit report and the inspection report of NABARD, the latter would be reckoned for determining the eligibility.
4.4 The eligibility norms will be applicable for drawal of refinance under both Farm and Off-Farm Sectors including Government Sponsored Schemes.
5. Eligible Purposes
5.1 Agriculture, MSME and other eligible loans which are outstanding in the books of the bank with a residual maturity period of more than 18 months as on the date of drawal application will be eligible for refinance.
5.2 List of activities covered under Farm sector and other sectors is mentioned in Annexure I. The list is only illustrative but not exhaustive. Activities not mentioned therein may also be covered if, it facilitates the promotion of agriculture and rural development.
5.3 Thrust Areas
Thrust areas include land development, minor & micro irrigation, water saving and water conservation devices, fisheries, animal husbandry, SHGs / JLGs / Rythu Mithra Groups (RMGs), agri-clinics and agri-business centres, rural housing, agro-processing, wasteland development, dryland farming, contract farming, area development schemes, plantation & horticulture, agro-forestry, seed production, tissue culture plant production, agri-marketing infrastructure (including cold storage, godowns, market yards etc.), agriculture implements, non-conventional energy sources, financing in areas of watershed & tribal development programmes already implemented.
Banks should give preference to finance innovative / thrust areas for various activities under plantation and horticulture sector such as production of high value exotic vegetables, cut flowers under controlled conditions i.e. poly house / green house, establishment of hi-tech export oriented production like mushroom, tissue culture labs, precision farming for enhancement of productivity in vegetables and fruits, installation of micro irrigation systems like drip for orchard and plantation crops.
6. Extent of Refinance
The extent of refinance for the States in North Eastern Region (Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura) including Sikkim, Hilly Region (Jammu & Kashmir, Himachal Pradesh, Uttarakhand), Eastern Region (West Bengal, Odisha, Bihar, Jharkhand and Andaman & Nicobar Islands), Lakshadweep and Chhattisgarh will be 100% of eligible bank loans for all purposes. For Other Regions the extent of refinance shall be :
a) 100% for all thrust areas as indicated at Sr. No. 5.3
b) 95% for all other diversified purposes and Krishak Sathi Yojana
7. Quantum of Refinance-
7.1 The quantum of refinance will be fixed as per the risk rating module and will be categorised from NBD 1 to NBD 9. The category-wise Quantum of Refinance is as under:
Criteria Quantum of refinance
NBD 1 to NBD3 (Marks >60 and ≤ 100) The quantum of refinance will be unrestricted subject to the overall allocation for the State/Bank.
NBD 4 (Marks >50 and ≤ 60) The quantum of refinance will be fixed at 25% over and above the refinance drawn in the previous year / 90% of the ground level credit for term loans disbursed by the concerned StCB / CCB during 2017-18, whichever is higher.
NBD 5 (Marks >40 and ≤ 50) The quantum of refinance will be fixed at 10% over and above the refinance drawn in the previous year / 80% of the ground level credit for term loans disbursed by the concerned StCB / CCB during 2017-18, whichever is more.
NBD 6 to NBD 9 (Marks ≤ 40) Bank will not be eligible for refinance.
7.2 With a view to increasing the credit flow to the States in the Eastern Region (West Bengal, Odisha, Bihar, Jharkhand and Andaman & Nicobar Islands), North Eastern Region including Sikkim, Hilly States (Jammu & Kashmir, Himachal Pradesh and Uttarakhand), Lakshadweep and Chhattisgarh) the category-wise eligibility criteria are mentioned below:
Criteria Quantum of refinance
NBD 1 to NBD3 (Marks >60 and ≤ 100) The quantum of refinance will be unrestricted subject to the overall allocation for the State/Bank
NBD 4 and NBD5 (Marks >40 and ≤ 60) The quantum of refinance will be fixed at 25% over and above the refinance drawn in the previous year / 90% of the ground level credit for term loans disbursed by the concerned StCB / CCB during 2017-18, whichever is higher.
NBD 6 to NBD 9 (Marks ≤40) Bank will not be eligible for refinance.
8. Interest rate
8.1 Interest on refinance : The interest rates on refinance will be decided by NABARD based on tenor, prevailing market rate, risk perception etc. and is subject to revision from time to time. All StCBs have been classified into 9 risk categories as per the risk assessment module devised by NABARD. Prescribed risk premium will accordingly be charged over and above the rate of interest on refinance.
8.2 Penal interest: In the event of default, penal interest rate of 2.00% p.a over and above the interest rate at which refinance was disbursed, will be charged on the defaulted amount and for the period of default.
8.3 Penalty for pre-payment of refinance: The rate of pre-payment penalty will be 2.50% p.a. and will be chargeable for each instalment due separately for the entire period (minimum 6 months) from the date of pre-payment to the date on which the instalment is actually due for payment. The prepayment can only be initiated after minimum notice of 3 working days.
9. Repayment period
Repayment period ranges between 18 months (minimum) and 5 years or above and be repaid on half-yearly basis every year with due dates as on 31st January and 31st July. Payment of interest is at half yearly rest i.e. on 01 February and 01 August every year.
The security for loans and advances by way of refinance or otherwise shall be such as may be specified by NABARD in the General Refinance Agreement (GRA)/Letter(s) of Sanction. Besides, a Mandate in favour of NABARD will have to be duly obtained by the StCB.
Refinance to the StCBs not satisfying norms indicated at Para. No. 11, both for Farm Sector & Off Farm sector will be extended only against State Government Guarantee. In the event of Government Guarantee (wherever required) not forthcoming, alternative security like pledge of Government securities or pledge of Fixed Deposit Receipts issued by Scheduled Banks or good working StCBs can be considered, subject to compliance with the terms and conditions stipulated by NABARD in this regard.
11. Terms and conditions for waiver of Government guarantee
11.1 Scheduled StCBs with audit classification ‘A’ under 2-tier and 3-tier structures
a. The scheme for which refinance is sought, is technically feasible and financially viable.
b. Security to be obtained should be in accordance with the instructions of RBI / NABARD.
c. The StCB should be having audit class ‘A’.
11.2 Scheduled StCBs with ‘B’ class audit under 3-tier structure
a. The scheme for which refinance is sought, is technically feasible and financially viable.
b. The CCB which finances the scheme should have ‘A’ audit class and should be satisfying the norms prescribed for StCB to be categorized as ‘A’.
c. The security to be obtained should be in accordance with the instructions of RBI / NABARD.
12.1 NABARD reserves the right to conduct spot verification / checks to ensure that terms and conditions of refinance are adhered to / complied with by StCBs.
12.2 NABARD will have the right to cause special audit of the books of accounts and other relevant material of the StCB / CCB, either by itself or through other agencies (at borrowing entity's cost) to ensure that the same are maintained as per the rules and regulations in force and the terms and conditions of refinance are adhered to by the bank.
12.3 Arrears in reconciliation of inter-bank and inter-branch accounts for the period beyond six months can result in denial of refinance assistance from NABARD.
13. All other terms and conditions will remain unchanged.
1. Following activities are covered under Farm Sector.
i. Land development
ii. Minor & micro irrigation, drip irrigation
iii. Water saving and water conservation devices
ix. Animal husbandry
x. Loans to Self Help Groups / Joint Liability Groups / Rythu Mitra Groups
xi. Dryland farming
xii. Contract farming
xiii. Plantation & horticulture
xv. Seed production
xvi. Tissue culture plant production
xvii. Loans to corporate farmers, farmers' producer organizations/ companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in Agriculture and Allied Activities, up to an aggregate limit of ₹ 2 crore per borrower
xviii. Agriculture implements
xix. Production of high value / exotic vegetables, cut flowers under controlled conditions i.e. poly house / green house,
xx. Establishment of hi-tech export oriented production like mushroom, tissue culture labs, precision farming for enhancement of productivity in vegetables and fruits
2. Following other activities are covered under refinance.
i. MSME for both manufacturing and service, that creates employment in rural areas
ii. Agri-clinics and Agri-business centres
iii. Rural housing
v. Soil conservation and watershed development.
vi. Agri-marketing infrastructure (including cold storage, warehouse, godowns, market yards, silos etc.) irrespective of their location
vii. Non-conventional energy sources,
viii. Financing in areas of watershed & tribal development programmes already implemented.
ix. Plant tissue culture and agri-biotechnology, seed production, production of bio-pesticides, bio-fertilizer, and vermi composting.
x. Bank loans to Primary Agricultural Credit Societies (PACS), Farmers’ Service Societies (FSS) and Large-sized Adivasi Multipurpose Societies (LAMPS) for on-lending to agriculture.
xi. Loans sanctioned by banks to MFIs for on-lending to agriculture sector
xii. KVI (Khadi Village Industries)
xiii. Rural Schools, health care facility, drinking water facility, sanitation facility and other Social infrastructure in Rural areas
xiv. Renewable energy like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for nonconventional energy based public utilities viz. street lighting systems, and remote village electrification
xv. Krishak Sathi Yojana
xvi. Area development schemes
3. Any other activities not mentioned above may also be covered if it facilitates the promotion of agriculture and rural development.