The State Projects Department (SPD) provides loans from the Rural Infrastructure Development Fund (RIDF) with the objective of supporting public sector capital investment in rural infrastructure through providing low cost fund support to State Govts. and State Owned Corporations. Over the years RIDF has become an important source of public capital formation in the rural infrastructure space.
1. Genesis of RIDF
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 operationalized 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 broad based 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.
2. Core functions of the Department
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
- Inverse of Composite Infrastructure Development Index
- Share in National Rural Population and Rural poverty rate
- Inverse of Credit/Deposit Ratio and inverse of per capita PS credit
- Performance under RIDF (Average disbursements and utilization of drawables)
- Average sanctions for Agriculture (including Irrigation) and Drinking Water projects
The amount of contribution by banks to a particular tranche of RIDF is communicated by RBI 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 prioritized and 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.
3. Broad achievements under RIDF
RIDF Tranche I, was placed with NABARD during 1995-96 with an allocation of Rs. 2,000 crore. The annual corpus has now reached to Rs. 29,763 crores under RIDF XXVI (2020-21).