Special Refinance Scheme for promoting Micro Food Processing Enterprises
India is ranked first in production of several agri-commodities. Despite producing a sizeable global production, India currently processes less than 10% of its agri output. Changing consumption patterns due to urbanization, changes in the gender composition of work force, and growing consumption rates have contributed to the increase in the growth rate of the sector. Food processing is almost uniformly divided between unorganized and organized sectors but unorganized sector has a strong foothold in traditional activities such as papad, noodles, pickles, squashed, sauces etc.  The unorganized food processing sector in the country comprising nearly 25 lakh food processing enterprises contribute to 74% of employment (a third of which are women) and 27% of the value addition in the food processing sector.  Nearly 66% of these units are located in rural areas and about 80% of them are family-based enterprises.  However, the sector faces a number of challenges including the inability of the entrepreneurs to access credit, lack of access to modern technology and inability to integrate with the food supply chain.  Investments in micro food processing activities in rural areas and deepening of institutional credit facility are expected to address these challenges.  
Considering the above issues, NABARD has conceived a Special Refinance Scheme to encourage banks to lend micro-food processing activities and create sustainable livelihood and employment opportunities for rural youth as well as reverse migrants due to COVID-19 pandemic in the rural areas. The scheme also envisages modernization and enhancing the competitiveness of the existing individual micro enterprises and ensure their transition to formal sector in rural areas. The refinance scheme will give fillip to the recently launched “PM Scheme for Formalisation of Micro food processing Enterprises (PM FME)” under Atmanirbhar Bharat Abhiyan by MoFPI, GoI under which about Rs.25,000 crore investment is expected in the sector. 
Under the Special Refinance Scheme, NABARD has decided to extend concessional long term refinance to all eligible banks/FIs at 4% to enable banks to accelerate capital formation in micro-food processing enterprises.  The refinance will be sanctioned under Automatic Refinance Facility (ARF) which shall enable banks to obtain financial accommodation from NABARD, without going through the detailed pre-sanction procedure formalities.  However, the banks have to maintain separate database for lending to micro-food processing activities. The detailed operational guidelines are furnished in the Annexure.
We request you to widely publicise the scheme in your bank and take advantage of concessional refinance.  We advise you to be in touch with our Regional Offices for further guidance and information on the subject.