National Equity Fund Scheme

Objective of the Scheme

Eligibility Criteria

• It is applicable for the new projects in tiny and small sectors for the manufacture, preservation or processing of goods.
• It is applicable for the existing tiny and small scale industrial units including those which have already availed NEF assistance, undertaken the expansion, modernisation, technology up-gradation, diversification etc.
• It is applicable for all new and existing service enterprises, including those which have availed of NEF assistance (except road transport operators). However, in the case of service enterprises, the support under NEF would be made available only for the acquisition of fixed assets.
• It applies to the sick units in the tiny and small scale sectors including service enterprises which are considered potentially.
• It applies to the projects which utilise any margin money or special capital assistance under the schemes of state or central government, State financial corporations and banks will not be eligible for assistance.
• Availment of refinancing with respect of term loan for the project by SIDBI is a pre-requisite for extending equity type assistance.

Eligible Institutions

• The State Financial Corporations
• The Twin-function industrial development corporations
• The Scheduled commercial banks and select urban and
• The State co-operative banks.

Project cost

Nature of Assistance

Terms of Assistance

Soft Loan Assistance

Interest Rate

Service Charge

Repayment Period

Security

Note

• The total fund requirement of the project in the form of equity assistance under NEF, term loan and working capital is to be issued by a single agency.
• The projects included under the Single Window Scheme (SWS) can also extend the assistance under the NEF Scheme if it satisfies the criteria under both the schemes. In such cases, the NEF assistance would be limited to 25% of the cost of fixed assets.
• Credit risk based on the loan assistance out of NEF is shared equally by GoI and SIDBI.
• In the cases of loan proposals where the qualified PLIs are fulfilled with the eligibility and need to give NEF support, they may make mandatory provision in this regard ever by redrawing the financing pattern to provide the required component of equity support out of NEF to all deserving small scale units.
• Similarly, any other interest/charge, service charge has to be collected from the borrowers by the qualified PLIs and maintained by them. PLIs are not to distribute with recovery proceedings on account of the absence of charge on assets etc. and take related steps for recovery of NEF as in the case of recovery of term loans. SIDBI will entirely bear the legal expenses incurred for the recovery of arrears of NEF assistance. All other terms and conditions applicable to a term loan in this regard are applicable mutatis mutandis to NEF assistance.
• In the case of default in the repayment of installments of the soft loan or service charge, or any postponement allowed by SIDBI/Bank/Corporation, such installment(s) unless agreed to by SIDBI, should carry interest at a rate which should not be more than the interest rate applicable to standard loans lent (present rate is 15.5% per annum).
• The revised NEF Scheme will apply to the loans sanctioned by Primary Lending Institutions on or after December 21, 2000.

Procedure for Availing Assistance

• A separate application is to be furnished for availing assistance under the NEF Scheme. Entrepreneurs while requesting for term loan assistance from the above mentioned eligible institutions can specify the amount of NEF assistance in their financing proposal.
• Eligible applicants will submit five copies of the application, duly completed to Zila Sainik Board (ZSBs), along with the project report.
• ZSB will maintain four copies of the application form and return one copy to the applicant duly endorsed.
• ZSB will transfer one copy to Rajya Sainik Board (RSB) and other three copies of the form along with the project plan to the concerned branch of the banks for the sanction of loan.
• Also, the copy of the letter should be transferred by ZSBs to SIDBI and the District Lead Bank Officer, for necessary information. One copy of the application form receipted will be reimbursed by the bank to the ZSB for their record. The borrowers will be intimated by the Secretary, ZSB about the sanction of loans.