Rural Infrastructure Development Fund (RIDF)

The primary role of the National Bank for Agriculture and Rural Development (NABARD) is to facilitate growth and also partners in the promotion of rural infrastructures. NABARD also helps the Indian Agricultural industries on import and export. It also supports any research and development that is made for rural areas. It provides technical support for rural area development projects and other activities. Rural Infrastructure Development Fund (RIDF) is one among the activity of NABARD.

Objectives of RIDF

The main aim of Rural Infrastructure Development Fund (RIDF) is to provide loans to State Governments to enable them to complete the rural infrastructure projects which are ongoing. RIDF was initially created out of commercial banks along with a sum amount of Rs 2,000 crore. From then, the total sum amount of the allocation has reached Rs 3, 20,500 crores, which also includes Rs 18,500 crore under Bharat Nirman (plan for creating basic rural infrastructure). NABARD also gives financial level assistance to State Governments from RIDF for more than 30 activities. Some commercial banks also help in funding to a certain period of time.

Role of RIDF

The primary role or activity of RIDF is to assist the government in identifying the important projects and in listing them according to their priority.
Sanction of projects from the priority list, which is done by the sanctioning committee of NABARD.
It helps and provides the fund support that is needed and also in cost-effective ways.
Monitors the entire process and evaluates them finally.
Associates, along with the Government for timely delivery.

Sanctioning of RIDF Projects

Through announcements that are made in Union Budget.
There are different parameters through which allocation is made for each State.
Some of the parameters are previous sanctions, the Level of payments made, rural population, and Infrastructure and Geographical land area.
Each State Governments prepare separate reports and send to NABARD for approval.
NABARD reviews the projects; a separate sanction committee is present in the head office which sanctions the project.
If the project is cost-effective and is feasible, the sanction committee sanctions the project.

Appraisal of Projects

The primary process is to find the risk factors and to analyse them.
The competency level of the project is identified.
Cost-effective and period of the project is taken into account.
Maintaining the Quality level throughout the project, without any security failures is ensured.

Project Requirements

Details for all expenses that are to be made throughout the project, which includes quality maintenance, maintenance cost, establishment cost, all the hardware components that are required.
Cost level escalation will not be allowed in most cases.
Construction flow and arrangements are required.
Economic analysis is made.
Source of funding and the techniques to be used for construction is required in a report format.
Photographs of the project land along with pictures of any similar projects executed.
Basic flowcharts or drawings of the detailed plan.

Eligible Sectors

In the current situation, there are 37 activities that are eligible under RIDF as approved by GoI. They are listed as 3 categories:

Agriculture and its related sectors
Social sector
Rural area connectivity

The list of activities are provided in the below:

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Percentage of Interest

The current rate of Interest in RIDF is 6.5%. The rate of interest that is to be paid to the bank, which has placed its deposit with NABARD and also the loans that are to be paid out by NABARD from RIDF have been linked to the Bank rate that is prevailing at that point of time.

Loan Repayment Period

The loan amount can be repaid in yearly installments within seven years from the date of which loan was sanctioned. There is also grace time provided with a period of two years.

Penalty Interest

Late payments or penalty interest should be paid at the same rate that is applicable to that of the principal amounts.

Security for Loan

A written letter from the party is submitted with all other documentary proofs that are registered with

RBI or any other Commercial Bank. Acceptance from State Government to the terms and conditions of sanction which is also mentioned in the duplicated copy of the sanction letter.

Monitoring of RIDF Projects

Project monitoring is done to ensure the quality levels, smooth functioning, and implementation of the proposed techniques. Ensure regular field visits of the District officers are made. Funds sources are monitored, and the flow of cost along with time will be monitored on a regular basis. There are various levels in which projects are monitored. Some of them are:

Monitoring for the flow of the project.
Critical issues that arise in due time after the start of the project.
Cost evaluation and flow.
Slow-moving modules of the project.
Selection of proper samples for the project.
Projects with different loan amounts are monitored separately.
The smooth functioning of the components that are used.

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Frequently Asked Questions

Common questions about Rural Infrastructure Development Fund (RIDF) Overview.

The Rural Infrastructure Development Fund (RIDF) is a fund created by NABARD to provide loans to State Governments for completing ongoing rural infrastructure projects. It aims to facilitate the development of rural infrastructure across various sectors.

RIDF was initially created with a corpus of Rs. 2,000 crores from commercial banks. Over time, the total allocation has reached Rs. 3,20,500 crores, including Rs. 18,500 crores under the Bharat Nirman scheme.

RIDF supports a wide range of activities across three broad categories – agriculture and related sectors, social sector, and rural connectivity. Currently, 37 activities are eligible for RIDF funding, as approved by the Government of India.

RIDF projects are sanctioned by NABARD's sanctioning committee after State Governments submit their project proposals. The committee evaluates the projects based on factors like cost-effectiveness, feasibility, and priority.

During project appraisal, NABARD analyzes various aspects, including risk factors, competency level, cost-effectiveness, quality maintenance, economic analysis, funding sources, and construction techniques, to ensure the project's viability.

The current interest rate on RIDF loans is 6.5%. The rate is linked to the prevailing bank rate and is applicable to both deposits placed by banks with NABARD and loans disbursed by NABARD under RIDF.

RIDF loans can be repaid in yearly installments within seven years from the date of sanction, with a grace period of two years.

State Governments provide written acceptance of the terms and conditions of sanction, along with documentary proofs registered with RBI or commercial banks, as security for RIDF loans.

NABARD employs various levels of monitoring to ensure smooth implementation, quality control, cost evaluation, and timely resolution of critical issues. Regular field visits, fund flow monitoring, and sample selection are part of the monitoring process.

RIDF plays a crucial role in promoting rural development by providing financial assistance to State Governments for completing rural infrastructure projects across various sectors, thereby improving the overall quality of life in rural areas.