The State Projects Department (SPD) provides loans from the Rural Infrastructure Development Fund (RIDF) with the sole objective of giving low cost fund support to State Govts. and State Owned Corporations. Initially, only State Governments were eligible to borrow out of RIDF on project basis. However, with effect from 1st April 1999, Panchayat Raj Institutions (PRIs), Non-Governmental Organisations (NGOs), Self-Help Groups (SHGs), etc. are also eligible to borrow out of RIDF. RIDF assistance constitutes about 1/5th of the total public capital formation by State Governments in the rural infrastructure space.

A major policy initiative for rural infrastructure development has been the setting up of RIDF in NABARD in 1995 for financing rural infrastructure projects.

RIDF was set up to fund incomplete infrastructure projects in States due to lack of financial resources. Due to inadequacy of critical infrastructure, banks were unable to channelise their lending to agriculture as per priority sector guidelines. 

The Government of India, therefore, announced in the budget of 1995-96, setting up of Rural Infrastructure Development Fund (RIDF), to be operationalised by NABARD towards financing of, at that point of time, the ongoing rural infrastructure projects in irrigation sector. Subsequently, RIDF was made available for new rural infrastructure projects and its ambit was broadened to cover almost all important aspects of rural infrastructure.

 

Resources to RIDF are contributed out of the shortfall in lending to priority sectors by Commercial Banks as stipulated by RBI. 

The corpus of a particular tranche of RIDF is decided by Government of India every year. Annual Corpus under RIDF is allocated among all States on the basis of prescribed norms comprising of

 

• Geographical Area of the State
• Composite Infrastructure Development Index
• Rural Population
• Inverse of Credit/Deposit Ratio 
• State Performance under RIDF (Utilisation of NA, actual drawals to drawables (%)
• Percentage of Borrowing power under RIDF to drawables
• Share of irrigation and agri related projects to total sanctions 
• The amount of contribution by banks to a particular tranche of RIDF is communicated by RBI  is based on the level of priority sector shortfall. The concerned banks are called upon by NABARD as and when funds are required for disbursement. 
• NABARD provides financial assistance to the State Governments for projects covering 37 activities broadly classified under 3 heads viz. Agriculture & Related Sector, Social Sector and Rural Connectivity.
• Eligible projects are submitted by the State Governments through their Finance Departments to the respective Regional Offices (ROs) of NABARD. The projects are appraised by NABARD’s Regional Offices and forwarded to NABARD Head Office where they are placed before a Project Sanctioning Committee (PSC) or Internal Sanctioning Committee (ISC) for consideration for sanction.
• Rural Infrastructure Promotion Fund (RIPF) has been created with an initial corpus of Rs. 25 crore and operationalized from 1st September 2011 with an objective to promote capacity building among stakeholders as also for supporting innovative/experimental/promotional infrastructure especially in rural sectors. The activities/projects supported under RIPF are in the nature of experimental prototype projects which are likely to have positive impact on promotion of sustainable infrastructure development in rural and agricultural sectors.