Q: What is RIDF.
A:Rural Infrastructure Development Fund (RIDF) was instituted in NABARD with an announcement in the Union Budget 1995-96 with the sole objective of giving low cost fund support to State Govts. and State Owned Corporations for quick completion of ongoing projects relating to medium and minor irrigation, soil conservation, watershed management and other forms of rural infrastructure.
Dr. Manmohan Singh, the then Hon’ble Union Finance Minister, while announcing the establishment of the RIDF, in his budget speech on 15 March 1995 stated:
A:Rural Infrastructure Development Fund (RIDF) was instituted in NABARD with an announcement in the Union Budget 1995-96 with the sole objective of giving low cost fund support to State Govts. and State Owned Corporations for quick completion of ongoing projects relating to medium and minor irrigation, soil conservation, watershed management and other forms of rural infrastructure.
Dr. Manmohan Singh, the then Hon’ble Union Finance Minister, while announcing the establishment of the RIDF, in his budget speech on 15 March 1995 stated:
"Inadequacy of public investment in agriculture is today a matter of general concern. This is an area, which is the responsibility of States. But many States have neglected investment in infrastructure for agriculture. There are many rural infrastructure projects, which have been started but are lying incomplete for want of resources. They represent a major loss of potential income and employment to rural population."
Q:List details of RIDF loan policy.
A:
Eligible Activities :
At present, there are 34 eligible activities under RIDF as approved by GoI. The eligible activities are classified under three broad categories i.e., Agriculture and related sector, Social sector and Rural connectivity.
Eligible Institutions:
State Governments / Union Territories, State Owned Corporations / State Govt. Undertakings, State Govt. Sponsored / Supported Organisations, Panchayat Raj Institutions/SHGs/ NGOs
Mode of Finance:
NABARD releases the sanctioned amount on reimbursement basis except for the initial mobilisation advance @ 30% to NE & Hilly States and 20% for other states.
Quantum of Loan and Margin/Borrower Contribution :
The project for rural connectivity, social and agri related sector, are eligible for loans from 80 to 95% of project cost. Cost escalation proposals for certain genuine reasons are considered within two years of sanction.
Rate of interest :
With effect from 01 April 2012, the interest rates payable to banks on deposits placed with NABARD and loans disbursed by NABARD from RIDF have been linked to the Bank Rate prevailing at that point of time.
Repayment period :
Loan to be repaid in equal annual installments within seven years from the date of drawal, including a grace period of two years. The interest shall be paid at the end of each quarter i.e. 31 March, 30 June, 30 September and 31 December every year, including grace period.
Penal Interest :
Interest on the overdue interest amount is to be paid at the same rate as applicable to the principal amount.
Security for Loan :
Loans sanctioned would be secured by the irrevocable letter of authority /mandate registered with Reserve Bank of India / any other Scheduled Commercial Bank, Time promissory Note(TPN), Execution of unconditional Guarantee from State Governments (Additionally required for support to State Govt. sponsored organisations, etc.) and acceptance of terms and conditions of sanction in the duplicate copy of the sanction letter.
Phasing of RIDF projects
The implementation phase for projects sanctioned is spread over 2-5 years, varying with type of the project and also location of the State.
Q. What is an NBFC-MFI?
Ans. An NBFC-MFI is defined as a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956) with Minimum Net Owned Funds of Rs.5 crore (for NBFC-MFIs registered in the North Eastern Region of the country, it will be Rs. 2 crore) and having not less than 85% of its net assets as “qualifying assets”.
Q. What are “Net Assets” and “Qualifying Assets”?
Ans. Net Assets: “Net assets” are defined as total assets other than cash and bank balances and money market instruments.
Qualifying Assets: Loan disbursed without collateral by an NBFC-MFI to a borrower with a household annual income not exceeding Rs. 60,000 (rural) or Rs. 1,20,000 (urban and semi-urban) and total indebtedness not exceeding Rs. 50,000 will be a qualifying asset provided:
loan amount does not exceed Rs. 35,000 in the first cycle and Rs. 50,000 in subsequent cycles;
tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 15,000 with prepayment without penalty;
aggregate amount of loans, given for income generation, is not less than 70 per cent of the total loans given by the MFIs and
loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower.
Q. What are the limitations imposed on an NBFC which does not qualify as NBFC-MFI?
Ans. An NBFC which does not qualify as an NBFC-MFI shall not extend loans to micro finance sector, which in aggregate exceed 10% of its total assets.
Q. Are there any restrictions on the remaining 15% of the assets that an NBFC-MFI holds?
Ans. No there are no restrictions.
Q. Can NBFC-MFIs lend funds for personal use/emergencies?
Ans. A part (i.e. maximum of 30%) of the aggregate amount of loans may be extended for other purposes such as housing repairs, education, medical and other emergencies. However aggregate amount of loans given for income generation should constitute at least 70 per cent of the total loans of the NBFC-MFI.
Q. Is there any restriction on pricing of the loan/interest recoverable on such loans?
Ans. The interest rates charged by an NBFC-MFI to its borrowers will be the lower of the following:
i. Cost of funds, plus margin
Cost of funds means interest cost and margin is a mark up of a maximum of 10 per cent for large NBFCs-MFI and 12 per cent for others. Large NBFCs-MFI are those with asset sizes above ` 100 crore
ii. The average base rate of the five largest commercial banks by assets multiplied by 2.75
The average of the base rates of the five largest commercial banks shall be advised by the Reserve Bank on the last working day of the previous quarter, which shall determine interest rates for the ensuing quarter. The Bank will announce the applicable average base rate on March 31, 2014 and every quarter end thereafter.
Q. What procedure is to be adopted for calculation of interest cost (cost of funds) and interest income by NBFC-MFIs?
Ans. The interest cost will be calculated on average fortnightly balances of outstanding borrowings and interest income is to be calculated on average fortnightly balances of outstanding loan portfolio of qualifying assets.
Q. What are the processing charges that a NBFC-MFI can levy on its customers?
Ans. Processing charges by NBFC-MFIs shall not be more than 1 % of gross loan amount. Processing charges need not be included in the margin cap. Further, NBFC-MFIs shall recover only the actual cost of insurance for group, or livestock, life, health for borrower and spouse. Administrative charges where recovered, shall be as per IRDA guidelines.
Q:List details of RIDF loan policy.
A:
Eligible Activities :
At present, there are 34 eligible activities under RIDF as approved by GoI. The eligible activities are classified under three broad categories i.e., Agriculture and related sector, Social sector and Rural connectivity.
Eligible Institutions:
State Governments / Union Territories, State Owned Corporations / State Govt. Undertakings, State Govt. Sponsored / Supported Organisations, Panchayat Raj Institutions/SHGs/ NGOs
Mode of Finance:
NABARD releases the sanctioned amount on reimbursement basis except for the initial mobilisation advance @ 30% to NE & Hilly States and 20% for other states.
Quantum of Loan and Margin/Borrower Contribution :
The project for rural connectivity, social and agri related sector, are eligible for loans from 80 to 95% of project cost. Cost escalation proposals for certain genuine reasons are considered within two years of sanction.
Rate of interest :
With effect from 01 April 2012, the interest rates payable to banks on deposits placed with NABARD and loans disbursed by NABARD from RIDF have been linked to the Bank Rate prevailing at that point of time.
Repayment period :
Loan to be repaid in equal annual installments within seven years from the date of drawal, including a grace period of two years. The interest shall be paid at the end of each quarter i.e. 31 March, 30 June, 30 September and 31 December every year, including grace period.
Penal Interest :
Interest on the overdue interest amount is to be paid at the same rate as applicable to the principal amount.
Security for Loan :
Loans sanctioned would be secured by the irrevocable letter of authority /mandate registered with Reserve Bank of India / any other Scheduled Commercial Bank, Time promissory Note(TPN), Execution of unconditional Guarantee from State Governments (Additionally required for support to State Govt. sponsored organisations, etc.) and acceptance of terms and conditions of sanction in the duplicate copy of the sanction letter.
Phasing of RIDF projects
The implementation phase for projects sanctioned is spread over 2-5 years, varying with type of the project and also location of the State.
Q. What is an NBFC-MFI?
Ans. An NBFC-MFI is defined as a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956) with Minimum Net Owned Funds of Rs.5 crore (for NBFC-MFIs registered in the North Eastern Region of the country, it will be Rs. 2 crore) and having not less than 85% of its net assets as “qualifying assets”.
Q. What are “Net Assets” and “Qualifying Assets”?
Ans. Net Assets: “Net assets” are defined as total assets other than cash and bank balances and money market instruments.
Qualifying Assets: Loan disbursed without collateral by an NBFC-MFI to a borrower with a household annual income not exceeding Rs. 60,000 (rural) or Rs. 1,20,000 (urban and semi-urban) and total indebtedness not exceeding Rs. 50,000 will be a qualifying asset provided:
loan amount does not exceed Rs. 35,000 in the first cycle and Rs. 50,000 in subsequent cycles;
tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 15,000 with prepayment without penalty;
aggregate amount of loans, given for income generation, is not less than 70 per cent of the total loans given by the MFIs and
loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower.
Q. What are the limitations imposed on an NBFC which does not qualify as NBFC-MFI?
Ans. An NBFC which does not qualify as an NBFC-MFI shall not extend loans to micro finance sector, which in aggregate exceed 10% of its total assets.
Q. Are there any restrictions on the remaining 15% of the assets that an NBFC-MFI holds?
Ans. No there are no restrictions.
Q. Can NBFC-MFIs lend funds for personal use/emergencies?
Ans. A part (i.e. maximum of 30%) of the aggregate amount of loans may be extended for other purposes such as housing repairs, education, medical and other emergencies. However aggregate amount of loans given for income generation should constitute at least 70 per cent of the total loans of the NBFC-MFI.
Q. Is there any restriction on pricing of the loan/interest recoverable on such loans?
Ans. The interest rates charged by an NBFC-MFI to its borrowers will be the lower of the following:
i. Cost of funds, plus margin
Cost of funds means interest cost and margin is a mark up of a maximum of 10 per cent for large NBFCs-MFI and 12 per cent for others. Large NBFCs-MFI are those with asset sizes above ` 100 crore
ii. The average base rate of the five largest commercial banks by assets multiplied by 2.75
The average of the base rates of the five largest commercial banks shall be advised by the Reserve Bank on the last working day of the previous quarter, which shall determine interest rates for the ensuing quarter. The Bank will announce the applicable average base rate on March 31, 2014 and every quarter end thereafter.
Q. What procedure is to be adopted for calculation of interest cost (cost of funds) and interest income by NBFC-MFIs?
Ans. The interest cost will be calculated on average fortnightly balances of outstanding borrowings and interest income is to be calculated on average fortnightly balances of outstanding loan portfolio of qualifying assets.
Q. What are the processing charges that a NBFC-MFI can levy on its customers?
Ans. Processing charges by NBFC-MFIs shall not be more than 1 % of gross loan amount. Processing charges need not be included in the margin cap. Further, NBFC-MFIs shall recover only the actual cost of insurance for group, or livestock, life, health for borrower and spouse. Administrative charges where recovered, shall be as per IRDA guidelines.
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