Ref. No. NB. DoR /376 / PPS - 9/ 2019-2020
26 April 2019
Cir. No. 110/ DoR – 36/ 2019
1. The Chief General Manger, General Manager, OIC,
National Bank for Agriculture and Rural Development,
All Regional Offices
2. The Director, BIRD, Lucknow;
3. Joint Director, BIRD, Bolpur, Mangalore
4. Principal, NBSC, Lucknow
Long-term Refinance Policy for F. Y. 2019-20 - DCCBs
Please refer to our Circular No. 83 / DoR – 29 / 2018 dated 11 April 2018 on Long Term Refinance Policy for F. Y. 2018-19 for DCCBs. It has been decided to continue with the refinance policy, with the following broad features :
1. Nature of Accommodation
Refinance assistance is provided to the banks in respect of their disbursement for various purposes under the following two windows.
1.1 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.
2. Eligibility criteria
2.1 DCCBs are to be classified into 9 categories viz. NBD 1 to NBD 9 as per the ‘risk assessment module’ developed by NABARD. Of the above, only such CCBs classified as NBD1, NBD2 and NBD3 will be eligible for our refinance. The quantum of refinance will be unrestricted, subject to the overall allocation for the State / Bank.
2.2. DCCB should have a CRAR of 9.00%
2.3. DCCB should have net NPAs less than 6.00%.
2.4. The DCCB should be in profit for the last three years (2016-17, 2017-18 and 2018-19)
2.5. 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 available). From 01 October 2019 to 31 March 2020, the same will be based on their audited financial position as on 31.03.2019. Sanctions and Drawals on or after 01 October 2019 will be permitted only to such DCCBs, which have completed the audit and submitted the relevant audit report to the concerned RO of NABARD
2.6. 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
2.7. The eligibility norms will be applicable for drawal of refinance both under farm and off-farm sector, including Govt. sponsored schemes.
3. Eligible Purposes
3.1 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
3.2 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.
3.3 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.
3.4 PACS as MSCs – Refinance will be sanctioned to DCCBs on specific projects from PACS in its area of operation preferably on a ‘cluster approach’. The activities eligible for refinance support is furnished as Annexure II.
The refinance to be sanctioned to the DCCBs will be out of the budget allocated by DoR, HO. While the loan will be sanctioned from the said budget, grant support not exceeding 10% of the loan component may be considered for the following activities:
? Knowledge dissemination centre – cost of one PC (need-based).
? Initial administrative cost to start new business activities.
? Activity specific training to farmers.
? In case the loan is sanctioned to DCCBs, the concerned bank can factor Project Management Expenses up to 2% from the grant component within the overall limit.
The grant will be operational from FSPD. In this connection, guidelines issued vide Circular No. 216 / BID-07 dated 29 August 2012 by BID may be followed. The appraisal of the project will be as prescribed by the aforesaid Circular.
4. Extent of refinance
The extent of refinance for the States in North Eastern Region, Hilly Region, Eastern Region, Lakshadweep and Chhattisgarh will be 100% of eligible bank loans for all purposes. For other regions, the extent of refinance will be:
a) 100% for all thrust areas as indicated at Sr. No. 3.3
b) 95% for all other diversified purposes and for Krishak Sathi Yojana.
5. Interest rate
5.1 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 DCCBs 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.
5.2 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.
5.3 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. Other conditions of pre-payment remains unchanged.
6. 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.
Refinance to the DCCBs will be extended only against State Government Guarantee. In the event of Government guarantee not forthcoming, alternative security like pledge of Government securities / approved securities or pledge of fixed deposit receipts issued by scheduled banks or good working StCBs (A / B audit classification as per last audit) can be considered, subject to compliance with the terms and conditions stipulated by NABARD in this regard.
8. Other terms and conditions
i. NABARD reserves the right to conduct spot verification / checks to ensure that terms and conditions of refinance are adhered to / complied with by DCCBs.
ii. NABARD will have the right to cause special audit of the books of accounts and other relevant material of the DCCB, 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.
iii. 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.
iv. NABARD may impose such other terms and conditions, as may be revised from time to time.
9. We advise you to circulate the new product to all the DCCBs in your State and take effective steps to mobilize business, from those in the ‘low risk category’.
10. Please acknowledge receipt.
Chief General Manager
Encl : 4 pages
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 non-conventional 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.
Activities eligible for refinance support under PACS as MSC are as under:
i. Agro-storage Centers: Upgradation of the existing storage facility or construction of new godowns along with sorting / grading unit as per Negotiable Warehouse Receipt System which enables them to issue warehouse receipts. Based on these receipts, the farmers can get loan against the crop stored and can cultivate the next crop. Thus, the farmers will be facilitated to get better price by holding the crops without affecting the fund flow position.
Support can also be provided for construction of godowns to store other inputs / consumables which do not come under the purview of the Capital Investment Subsidy (CISS) Scheme of GoI or any such scheme of State Government.
ii. Setting up of cold storage: Assistance will also be given for setting up of the cold storage. In case, PACS is claiming subsidy under Grameen Bhandran Yojana, NHB / NHM Schemes or under any other such Scheme, the loan can be routed through CCB / StCB, since NABARD is not one of the eligible institutions to claim subsidy.
iii. Agro-service centers: Purchase of hi-tech agri-implements like power tiller, land leveler, rotary slasher, movers, seed driller, multi-crop planter, paddy trans planter, sprayers, combine harvester etc. depending up0n the requirements of members. The earning will be from the custom hiring / rental of these equipments. Support is also provided for setting up the diesel pump, being one of the major inputs of farming.
iv. Agro-processing centers:
Primary processing – Sorting, grading unit, waxing / polishing unit, pre-cooling chambers etc. drying yards, packaging facilities, poultry dressing units etc. will also be considered.
Secondary processing – Value addition to produce e.g. mini rice mill, atta chakki, agro-processing facilities etc.
v. Agri-information centre: Soil & water testing lab, providing services on payment basis of a panel of experts in various fields of agriculture, knowledge dissemination centre, arrange training to farmers. These services will be provided to farmers at a cost.
vi. Agri-transportation & marketing facilities: Procurement of produce, direct market linkage after aggregation and / or processing, setting up of rural mart, purchase of transport vehicle etc. The PACS, which are either in the area of marketing or intend to undertake this activity, may create this channel to facilitate the farmers in marketing.
vii. Consumer store & other miscellaneous activities: There has been a demand from the rural areas to have the regular supply of other consumables at reasonable rates. PACS can be supported for having ‘one-stop shop’ wherein they will sell / market all types of consumables besides the agriculture produce/ agri-inputs. PACS can also be supported to have the LPG agency or petrol pump outlet provided they have the necessary license and adhere to the terms & conditions of the licensing authority.
viii. PACS as PO for on-lending to select members for farm / NFS / service sector activities, besides crop loan ST-SAO: In case PACS support backward or forward linkage for select members for taking up any agri-allied activity, loan can be provided to PACS for on lending to its select members for supporting such activity. PACS will disburse the loan to its select members at per their approved interest rate. Such activity may be taken on a cluster basis.