NCDC Direct Funding
NCDC Direct Funding
The National Cooperatives Development Corporation (NCDC) is a statutory body function under the Ministry of Agriculture & Farmers’ Welfare. It is responsible for the improvement of the cooperative sector by implementing programs, funds and schemes for their growth. By promoting the welfare of cooperative societies, the NCDC contributes to the development of the rural economy. It helps to create employment opportunities, increases the income of rural people and infuses capital into underfinanced sectors. The programs of the NCDC cover a range of activities such as production, processing and marketing of agricultural products and some notified commodities. These include fertilizers, rubber, textiles, insecticides, oil and many other products. Apart from funds routed through state governments, cooperatives have the option of approaching the NCDC for direct funding for their projects. In this article, we will discuss in detail the process of availing NCDC Direct Funding.
Cooperative societies engaged in various sectors must meet the following conditions in order to avail direct funding from NCDC:
- The cooperative must possess positive net-worth in order to apply for assistance.
- The share capital of the cooperative must not be eroded.
- Taking into consideration all long term loans, the cooperative’s debt-equity ratio must normally remain between 65:35 and 70:30. This condition is applicable for projects undertaking manufacturing or processing activity.
- At least six months prior to the end of the financial year, the audit of the previous year’s accounts must be completed.
- For new cooperative societies, the six month period for audit shall be calculated from the date when it is dues according to the act based on which the cooperative has been registered.
- Delays in the case of government auditors undertaking the task, the audit done by the chartered accountant may be submitted.
- The cooperative that is applying for NCDC Direct Funding assistance must have no significant default in case of repayment of earlier loans to banks, NBFCs or even NCDC itself.
- Other cooperatives where the directors of the applicant cooperative had previously been directors must also not be at default for earlier loans.
Securities for NCDC Direct Funding
- The value of assets that the cooperative plans to use as security must have sufficient security margin, usually at least 1.25 or 1.5 times.
- In case of shortfall of security, it can be made up by using:
- A guarantee from a scheduled bank
- An FDR endorsed towards NCDC from a scheduled bank
- For FDR security, the margin shall not be lesser than 1.1 times
- Based on the discretion of the NCDC, the applicant entities may be asked to furnish additional securities in the form of any one or more of the following:
- Government guarantee
- Guarantee form a scheduled bank
- A personal guarantee from the directors of the cooperative society
- Collateral security
- The cooperatives can avail working capital loans through hypothecation of stocks or any other assets, with at least 20% margin.
- In certain cases for working loans, additional security of first or second charge on fixed assets may also be necessary.
- Minimum margin may not be insisted upon for working capital loans for the purpose of government procurement and price support activities.
- Cooperative societies interested in NCDC Direct Funding for their projects must first ensure they meet all the eligibility criteria.
- To proceed further, they may either approach the NCDC through the Office of Registrar of Cooperative Societies (RCS) or contact the relevant regional office of the corporation. The list of field offices along with their contact details may be found online at the official website: http://www.ncdc.in/
- Cooperatives may also reach the corporation through their respective state governments.
- Proposal with all the details regarding the project for which direct funding is sought must be presented.
- Common loan application forms for requesting financial assistance and other details regarding direct funding are also available on the official website.
Selection of Projects
Satisfying all the conditions for eligibility alone does not assure the cooperative society of direct funding from NCDC. Since direct funding is received for specific projects, the NCDC will scrutinise all the aspects of the project to determine the sanction of assistance. For assessment purposes, the following parameters are used:
- Technical feasibility of the project
- Financial viability of the project
- The financial state of the cooperative society
- Past track record of the cooperative in matters of finances and operational performance
- Expertise and professionalism of the directors and employees of the cooperative
- Prior experience of the management in dealing with projects of a similar nature
- Loan repayment history of the cooperative society
- The ability of the cooperative to finance its own share of the project funding
- Presence of sufficient security to avail the funding
Funding and Repayment
Generally, the quantum of assistance available under NCDC Direct Funding is as follows:
Source of finance
Funding (% of project cost)
|NCDC Direct Funding|
- Once the cooperative has managed to raise 50% and utilise 40% of the project’s equity portion (as members’ or respective state government’s share capital and internal accrual), the NCDC shall consider releasing 25% of the ways and means advance for the project.
- Further phases of fund release will depend upon incurred expenditure and expenses for one month as certified by a chartered accountant.
- In the case of projects that have received NCDC Direct Funding in excess of 10 crores, a chartered accountant from a panel approved by NCDC shall perform the certification.
- NCDC Direct Funding loan can be paid back at quarterly or half-yearly instalments. Funds routed through state governments are repayable in annual instalments.
- For direct funding above 50 lakhs, processing fee of 0.5% of the sanctioned amount shall be collected. The fee is capped at Rs.2.5 lakhs, meaning the maximum amount of loan is Rs.5 crores.
- Working capital loans are exempted from processing fee for up to one year.