SHGs, Dairy, Horticulture, Cash Crop

Loans
STC JAIPUR
SELF HELP GROUPS
PSFID- 54/2020
 Background

• Self Help Groups have the potential to bring together the formal banking
structure and the rural poor for mutual benefit.
• Studies conducted by NABARD in a few states to assess the impact of
the linkage project have brought out encouraging and positive features
like increase in loan volume of the SHGs, definite shift in the loaning
pattern of the members from non-income generating activities to
production activities, nearly 100 per cent recovery performance,
significant reduction in the transaction costs for both the banks and the
borrowers etc., besides leading to a gradual increase in the income level
of the SHG members.
• Another significant feature observed in the linkage project is that about
85 per cent of the groups linked with banks were formed exclusively by
women
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 Background

• Recognizing the importance of SHG Bank linkage, banks have

been advised to meet the entire credit requirements of SHG
members, as envisaged in Paragraph 93 of the Union Budget
announcement for the year 2008-09, made by the Honorable
Finance Minister, wherein it was stated as under: "Banks will be
encouraged to embrace the concept of Total Financial Inclusion.

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 Opening of Savings Bank Account

• The SHGs, registered or unregistered, which are engaged in

promoting savings habits among their members are eligible to
open savings bank accounts with banks.

• These SHGs need not necessarily have already availed of

credit facilities from banks before opening savings bank
accounts.

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 Opening of Savings Account

• CDD of all the office bearers shall suffice. No separate CDD of

the members or office bearers shall be necessary at the time of
credit linking of SHGs

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 Lending to SHGs

• Bank lending to SHGs should be included in branch credit plan,

block credit plan, district credit plan and state credit plan of
each bank.

• A simple system requiring minimum procedures and

documentation is a precondition for augmenting flow of credit to
SHGs.

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 Lending to SHGs
• SIZE OF GROUP: The group could consist of 10-20 members.

• QUANTUM OF CREDIT:
• The quantum of credit given should be in proportion to the
savings mobilized by the group. The proportion of savings to
loan could vary from 1:1 to 1:4
• depending upon the assessment of the SHG by the branch.

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 Eligibility
• ELIGIBILITY:
• SHG should consist of 10-20 persons. In difficult/ remote tribal
areas/ groups with disabled persons – min. 5 persons.
• SHG should be in active existence at least since the last 6
months as per the books of account of SHG and not from the
date of opening of S/B account.
• SHG should be practicing “Panchasutras” i.e. Regular
meetings, Regular savings, Regular inter loaning, Timely
repayment and Up to date books of accounts.

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 Eligibility
• Qualified as per grading norms fixed by NABARD. As and when
the Federations of SHGs come to existence, the grading
exercise can be done by the Federations to support the Banks.

• The existing defunct SHGs are also eligible for credit if

they are revived and continue to be active for a minimum
period of 3 months.

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 FINANCIAL ASSISTANCE:

• Revolving fund minimum Rs. 10000/- and maximum Rs.

15000 per SHG would be provided by NRLM. Capital subsidy
has been discontinued under NRLM.

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 QUANTUM OF LOAN

• Cash Credit Limit (CCL): To sanction minimum loan of ₹5 lakhs to each

eligible SHGs for a period of 5 years with a yearly drawing power (DP).
The drawing power may be enhanced annually based on the repayment
performance of the SHG.
• The drawing power may be calculated as follows:
• DP for First Year: 6 times of the existing corpus or minimum of Rs. 1 lakh
whichever is higher.
• DP for Second Year: 8 times of the corpus at the time review/
enhancement or minimum of Rs. 2 lakh, whichever is higher.

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 Quantum of Loan
• DP for Third Year: Minimum of Rs. 3 lakhs based on the Micro credit plan
prepared by SHG and appraised by the Federations /Support agency and
the previous credit History.

• DP for Fourth Year onwards: Minimum of Rs. 5 lakhs based on the Micro
credit plan prepared by SHG and appraised by the Federations /Support
agency and the previous credit History.

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 Term Loan:

• First Dose: 6 times of the existing corpus or minimum of Rs. 1

lakh Whichever is higher.
• Second Dose: 8 times of the existing corpus or minimum of Rs.
2 lakh, whichever is higher.
• Third Dose: Minimum of Rs. 3 lakhs based on the Micro credit
plan prepared by the SHGs and appraised by the
Federations /Support agency and the previous credit History
• Fourth Dose: Minimum of Rs. 5 lakhs based on the Micro credit
plan prepared by the SHGs and appraised by the
Federations /Support agency and the previous credit History

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 Service/Processing charges
• No loan related and ad hoc service charges/inspection charges
should be levied on priority sector loans up to ₹ 25,000.

• In the case of eligible priority sector loans to SHGs/JLGs, this

limit will be applicable per member and not to the group as a
whole.

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 Defaulters in SHGs
• Defaults by a few members of SHGs and/or their family
members to the financing bank should not ordinarily come in the
way of financing SHGs per se by banks, provided the SHG is
not in default.

• However, the bank loan may not be utilized by the SHG for
financing a defaulter member to the bank.

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 Important Guidelines- PSFID CIR- 43/2017

• Credit should be provided in bulk to group directly . The group in turn would
undertake on-lending to its members for any purpose as the wisdom of the
group.

• The Incumbents of branches in JMG Scale I, MMG Scale II & III may be
empowered to sanction unsecured loan/clean advance per SHG up to a
maximum limit as follows:
• JMG Scale - I : Rs. 2.00 lac
• MMG Scale -II : Rs. 5.00 lac
• MMG Scale -III : Rs. 8.00 lac

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 Important Guidelines- PSFID CIR- 43/2017

• Loaning powers of Incumbents of branches Scale IV & above

for financing unsecured loan/clean advance to SHG may be up
to Rs.10.00 lac per SHG.

• Under Government Sponsored Schemes, finance provided to

SHGs is utilized for creation of assets to be used for economic
activities by SHG members and the assets are also charged in
favour of the bank, these are not clean advance.

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HORTICULTURE
PSFID- 27/2020
 Background
• Horticulture sector has a great potential in India for growing
variety of crops such as fruits, vegetables, flowers, spices,
plantation crops, root and tuber crops, aromatic and medicinal
plants because of vast diversity in physiographic, agro-climatic
and soil characteristics .

• Horticulture products are highly perishable in nature and about

37 per cent of produce is lost during post harvest handling.

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• The National Horticulture Board, Gurgaon, is the Nodal Agency
(having its Regional Offices at State level) for establishing post
harvest infrastructure especially for horticulture produce.

• National Horticulture Mission has been launched as a centrally

sponsored scheme to promote growth of Horticulture Sector.

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 Purpose
1. Establishment and development of new orchards or groves of:

• Fruit crops like mango, grapes, litchi, apple, guava, pomegranate,

banana, citrus, etc.
• (b) Plantation crops like tea, coffee, cashewnut, coconut, cocoa,
arecanut, rubber, oil palm, betel vine, etc.
• (c) Ornamental crops like rose, jasmine, gerbera, gladiolus, foliage
plants, etc.
• (d) Spices crops like cardamom, pepper, clove, cinnamon, nutmeg,
etc.
• (e) Medicinal plants like safed musli, Aloe vera, guggul, pippali,
aonla, isabgol, dioscorea, rauwolfia, periwinkle, etc.

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 Purpose
2. Horticultural/Plantation activities/operations:

• Development of land by clearing bushes and undertaking soil conservation

and drainage measures.
• (ii) Purchase of planting material at initial stage as well as for replanting or
in filling of gaps.
• (iii) Digging of pits, ploughing and preparation of soil.
• (iv) Fencing, construction/installation of support structures, wire netting,
tree-guards, farm building/sheds.
• (v) Purchase of implements/equipments used for pruning, harvesting,
spraying, dusting, fumigation and irrigation.
• (vi) Laying out of irrigation channels, water-courses, over-head tanks,
water storage/harvesting tanks.
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 Eligibility
• Individual farmers or group of farmers having aptitude/adequate
experience together with stipulated land holding (either as
owner or on the basis of long term tenancy/lease right) will be
eligible for loan. Tenancy/lease period should be adequate i.e.
at least 3 years more than the economic life of plants to be
grown.

• (ii) Public Sector Undertakings or private firms desirous of

seeking financial assistance for plantation of fruit trees or other
economic plants on project basis.

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 Nature of Facility

1. Short term loan or cash credit facility may be provided under

KCC Scheme:
• (a) For purchase of fertilizer, pesticides, cropping operations,
plucking, grading and marketing of fruits, post harvest
operations.
• (b) For cultivation of seasonal vegetables, flowers and/or other
intercrops.
• (c) For cultivation of traditional plantations (i.e. tea, coffee,
rubber and spices) irrespective of size of holding.

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 Nature of Facility
2. Medium term loan for development of orchards or
vegetable/flower gardens, (some vegetable crops stand in the
field for 4-5 years during one life circle for which medium term
loans may be considered.).

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 Extent of Loan
Need Based.
• Since cultivation of fruit and other plantation crops is capital intensive activity
requiring farm entrepreneurship, intending borrower should be advised to
submit a project report detailing items of development, cost of cultivation,
projected yield and income, etc.

• Extent of working Capital loan would depend upon scales of finance. It may,
however, be kept in view that being cash crop, horticultural activities (growing-
fruits, vegetables, flowers, etc.) would require comparatively liberal scales of
finance.

• In case marketing loan is also considered, it should not exceed 20 per cent of
the estimated value of crop.
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 Margin Norms
• For production credit and/or Investment Credit:

• AMOUNT OF LOAN MARGIN

• i) Upto Rs.1,60,000/- NIL
• ii) Above Rs. 1,60,000/ to Rs.2 lakh 5%
• iii) Above Rs.2 lakh to Rs 5 Lakh 10%
• iv) Above Rs 5 Lakh 25%

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 Important Points
• Where subsidy is available, the same should be treated as
margin and no further margin money should be stipulated
unless the subsidy falls short of the requisite margin.

• Labour and materials, etc., contributed by farmer should be

treated towards building up of margin.

• Where the scheme has been approved by NABARD, the terms

and conditions stipulated by NABARD in respect of margin shall
be followed.

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 Security Norms
Investment Credit Security

For loan up to Rs.1,60, 000/- Hypothecation of assets created out of bank loan

Above Rs.1,60, 000/- Hypothecation of assets created out of bank loan

AND Charge on land as per
Agricultural Credit operations and Miscellaneous
Provisions Act of the State concerned/Mortgage of
agricultural land valued at 100% of amount of loan
for other farmers and 75% of the loan amount for
small farmers/marginal farmers. OR

Alternate security viz. charge/lien over liquid

securities such as term deposits/NSC/KVP, etc.
which may be considered adequate.
OR Suitable third party guarantee

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 Rate of Interest
• The rate of interest shall be charged as prescribed by the Bank
from time to time issued through IRMD, Loans and Advances
circulars.
• Interest is 7% p.a. in the regular Crop loan/KCC accounts on
running balance outstanding up to Rs. 3 lakh. The above
guidelines are linked to the subvention as per GOI/RBI
guidelines.

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 Mode of Disbursement
• Loan should be disbursed in installments commensurating with stages of
implementation of project.
• First installment may be disbursed before start of planting season in order to filling of
the pits, etc. This installment should be given preferably in the month of May/June for
rainy season planting or in the month of December/January for the spring season
plantings.
• Loan for purchase of plant material, seeds, manure, fencing, etc., should normally be
paid directly to the agency supplying items on behalf of borrower.
• The cost of plants to be purchased may be disbursed in cash upto Rs.10000/- in
advance to enable borrowers to purchase quality plants/seedlings from the
Government reputed nurseries.
• Labour charges may also be disbursed in cash upto 25 per cent of labour cost
involved for the year at a time and after verification of its proper end use, next
installment may be released in cash not exceeding 25 per cent of total labour
components for the year.

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 Mode of Disbursement

• Loan for raising vegetable or flower crops or other intercrops

may be disbursed in accordance with the guidelines given in our
scheme for financing crop loans.
• However, in some of the cases medium term loan may be
required to take care of production and investment credit needs
in an integrated manner for cultivating long standing vegetable
crops (Kundru, Chow-chow, etc.), perennial fodder crops or for
undertaking floricultural activities.
• In these cases, disbursement of loan would be made in stages
corresponding with on-farm developments.

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 Mode of Disbursement

• Loan for marketing purposes i.e. purchase of packing material,

etc., should not be released earlier than 2 months from start of
picking season.

• Investment Loan upto Rs.50,000/- may be released in cash.

This will be in addition to the limit sanctioned under KCC/Crop
Loan for cash disbursement of loan. Investment Loan beyond
Rs.50,000/- should be disbursed by making payment directly to
the suppliers on behalf of borrowers. Invoices/cash receipts
should be obtained and kept in the branch record.

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 Gestation Period
• Gestation period will vary with variety of plants/trees grown. Unit
Cost, economic life, gestation period and repayment period for
various horticultural crops and plantation crops are given in
Appendix-I.

• Suitable gestation period must be provided while financing

plantation or horticultural activities as income starts only after
plants/trees start yielding. In case where loan has been
disbursed for rejuvenating existing orchard plantation, gestation
period should be fixed based on pattern of expected yield.

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 Repayment of Loan
• Short Term Loans: As per KCC Scheme.
• Medium Term Loan:
• a. REPAYMENT OF PRINCIPAL:
- Since development of new orchards/plantation is a long drawn
process, repayment period should be stipulated keeping in view
variety of plants/ trees grown in orchard/grove.
- Installments should be fixed keeping in view the cash flow
projections and according to pattern of incremental income.
Repayment may be fixed in yearly installments while total
repayment period should be inclusive of moratorium period.

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• b. REPAYMENT OF INTEREST:
- Interest accrued during the gestation period may be recovered
from borrower from out of income derived from intercropping or
from any other identifiable source, wherever possible. Alternately
interest accrued during gestation period shall be recovered
alongwith principal as per the repayment schedule. However, in
such cases, interest will not be compounded.

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 NABARD REFINANCE
• NABARD provides refinance to the extent of 90%-100% of Bank
loan, depending upon the agricultural activity and the
geographic location of lending. Refinance from NABARD is to
be availed in conformity with Head Office decision taken from
time to time.

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DAIRY ENTREPRENEURSHIP DEVELOPMENT SCHEME

PSFID- 21/2019

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 BACKGROUND
• Department of Animal Husbandry and Dairying is implementing
Dairy Entrepreneurship Development Scheme (DEDS) since
01.09.2010 with the objective of generating self employment
opportunities in the dairy sector, covering activities such as
enhancement of milk production, procurement, preservation,
transportation, processing and marketing of milk, by providing
back ended capital subsidy for bankable projects.

• The scheme is implemented by NABARD

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 Objective
• To generate self employment and provide infrastructure for dairy
sector.
• To set up modern dairy farms and infrastructure for production of
clean milk.
• To encourage heifer calf rearing for conservation and
development of good breeding stock
• To bring structural changes in the unorganised sector, so that
initial processing of milk can be taken up at the village level.
• To upgrade traditional technology to handle milk on a commercial
scale
• To provide value addition to milk through processing and
production of milk products.
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 Implementing agency
• NABARD will be the nodal agency for implementation of the
scheme DEDS through the country.

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 Eligible beneficiaries
• Farmers, individuals, entrepreneurs and groups of unorganised
and organised sector are eligible under DEDS.

• Group of organised sector includes, SHGs on behalf of their

members, Dairy cooperative societies, Milk unions on behalf of
their members, Milk federation, PRIs (Panchayati Raj
institutions)

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 Eligibility
• An applicant will be eligible to avail assistance for all
components under the scheme, but only once for each
component. However, more than one family member of a family
can be assisted under the scheme provided they set up
separate units with separate infrastructure at different locations.

• Priority shall be given to projects being implemented in a cluster

mode covering dairy farmers/Women in SHGs, Cooperatives
and producer companies including creation of facilities of
processing, value addition and marketing of milk produced in
the cluster.

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 Pattern of Assistance
• Back ended capital subsidy @25% of the project cost for
general category and @33.33% for SC/STC Farmers.

• Entrepreneur contribution (Margin) for loans beyond Rs. 1 Lakh-

> 10% of the project cost (Minimum).

• Bank Loan- Balance portion.

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 Rate of interest
• Shall be as per RBI Guidelines prescribed from time to time.
• The bank may charge interest on the entire amount, until the
subsidy portion is received; and from the date of receipt of
subsidy, interest shall be charged only on the effective bank
loan portion i.e bank loan minus subsidy.

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 Time limit for completion of the project
• Time limit for completion of the project (except for calf rearing units
where disbursements are expected to continue up to two years)
would be envisaged under the project, subject to a maximum period
of 9 months from the date of disbursement of the first installment of
loan.

• The maximum period may be extended by 3 months in cases where

justification provided by the beneficiary is found adequate by the
financing bank.

• In case, the project is not completed within the stipulated period,

benefit of subsidy will not be available; the advance subsidy placed
with the participating bank, if any, shall be refunded to NABARD.
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 Security/ Surety
• Security for availing the loan shall be as per guidelines issued
by RBI from time to time.

• The beneficiary contribution of 10% shall not be required for

loans less than Rs. 1lakh or any amount as specified by RBI.

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 Repayment
• Repayment period will vary between 3-7 years depending on
the nature of the activity and cash flow. Grace period may range
from 3 to 6 months in case of dairy farms to 3 years for calf
rearing units.

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 Amount of subsidy
• Capital subsidy will be back ended with a minimum lock-in
period of 3 years, and shall be refunded if the account becomes
a Non Performing Account (NPA).

• The subsidy amount will be kept in “Subsidy Reserve Fund

Account (Borrower-Wise) in books of the financing bank.

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 Monitoring mechanism by agencies
• PSC (Project Sanctioning Committee): PSC set up at
NABARD shall monitor and review the progress of the scheme
on quarterly basis.

• JMC (Joint Monitoring Committee): set up under the

chairmanship of Joint Secretary with representatives of
NABARD will monitor the progress on regular intervals.

• STATE LEVEL BANKERS COMMITTEE (SLBC) and DCC

(District Consultative Committee) shall review and monitor
the scheme in the concerned state at regular intervals.

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THANK
YOU