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Long Term Rural Credit Fund (LTRCF ) Scheme – NABARD

Long Term Rural Credit Fund (LTRCF ) Scheme 

The Reserve Bank of India has allocated funds under Long Term Rural Credit Fund (LTRCF ) for 2021-22 to meet the long-term investment credit needs of agriculture activities supported by Cooperative Banks and Regional Rural Banks (RRBs). Accordingly, National Bank for Agriculture and Rural Development (NABARD) has issued the guidelines on Long Term Rural Credit Fund Scheme vides a Circular dated 8th September 2021. The current article briefs the guidelines in detail.

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Long Term Rural Credit Fund

To give a boost to long-term investment credit (LTRCF ), the Government of India set up a “Long Term Rural Credit Fund” with NABARD for providing long-term refinance support for investment credit in agriculture activities exclusively for Cooperative Banks and Regional Rural Banks (RRBs).

The interest rate on refinancing from NABARD will be 2.90% p.a. (with quarterly rests), subject to revision by NABARD from time to time.

Eligible institutions

All Regional Rural Banks which are eligible to avail refinance facilities from NABARD will be eligible for refinancing under this scheme.

Eligibility criteria

The Government has been decided to waive the preliminary eligibility criteria of Capital to Risk (Weighted) Assets Ratio (CRAR), Net  Non Performing Assets(NPA), and Net Profit for RRBs and extend Long Term refinance to all RRBs whose internal Risk Rating Category is NBD1 to NBD7.

Note: From 01 July 2021 to 31 March 2022, the risk assessment will be based on the audited financial position as of 31.03.2021.

  • Sanction and drawls will be permitted only to such RRBs, which have completed the audit and submitted the relevant audit report to the concerned RO of NABARD.
  • Any improvement in the financial parameters during F.Y 2021-22 may be considered, after a limited review and a certificate from the Chartered accountant with recommendation on the same by the NABARD RO.
  • The eligibility norms will be applicable for drawl of refinancing under both Farm and Off-Farm Sectors including Government Sponsored Schemes.

However, following the RBI instruction to improve the flow of credit to the credit-starved districts by banks, NABARD has allocated 25% of the corpus funds under Credit Fund (LTRCF) towards identified districts where credit flow is comparatively low.

Eligible Investment Activities

All eligible investment activities under the agriculture sector (excluding Self Help Groups as they are covered under NRLM / Interest Subvention Scheme) will be covered under this scheme.

Extent of Refinance

The extent of refinancing will be 95% of eligible bank loans for all purposes. in the following states.

  • North Eastern Region (Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, and Sikkim)
  • Hilly Region (Jammu & Kashmir, Himachal Pradesh, Uttarakhand)
  • Eastern Region (West Bengal, Odisha, Bihar, Jharkhand, and Andaman & Nicobar Islands), Lakshadweep and Chhattisgarh

For other regions the extent of refinancing will be:

  • 95% for all thrust areas (as indicated in our refinance policy)
  • 90% for all other diversified purposes.

Automatic Refinance Facility

Automatic Refinance Facility will be extended without any upper ceiling of refinancing quantum, bank loan, or Total Financial Outlay for all projects under the agriculture sector. In case, any bank intends to avail refinance under the pre-sanction procedure, they may submit projects to NABARD.

Interest rate

Loans to borrowers

The rate of interest on loans to ultimate borrowers will be as per RBI guidelines. Banks may however extend loans to farmers at a concessional rate of interest as compared to their normal lending for agricultural activities.

Refinance from NABARD

The interest rate on refinancing from NABARD will be 2.90 % p.a. (with quarterly rests), subject to revision from NABARD from time to time. Banks may pass on the benefit to the ultimate borrower.

Penal interest

In the event of default in repayment of principal and /or payment of interest, RRBs will be liable to pay to NABARD interest on the amount of default at 2% over and above the interest rate on LT refinance (Normal) for 5 years and above as prevailing on the date of default for the period for which the default persists. The penal interest rates are subject to revision from time to time.

Repayment period

  • The repayment period for refinancing will be 5 years to be repaid on a half-yearly basis on 31 January and 31 July every year.
  • Interest payment will be every quarter on 01 February, 01 May, 01 August, and 01 November every year.

Maintenance of Records

Refinance extended under the LTRC Fund has to be accounted for separately and necessary records should be maintained for the purpose.

  • The banks have to provide all information like the average amount of loan, the interest rate charged, processing fee charged, etc. as and when called for by NABARD.
  • All the other existing terms and conditions, laid down in our operational guidelines, for availing of refinance will be applicable under the scheme.