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National Bank for Agriculture and Rural Development (NABARD)

Ref. No. NB./ ICD / AH-3(VCF)/317/2005-06
14 July 2005

The Director,
Department of Animal Husbandry & Veterinary Services,
Orissa, Mangalabag, Cuttack – 753 001.

Dear Sir

Venture Capital Fund for Dairy / Poultry Sectors

  1. As you are aware, Government of India is according top priority for increasing the food production so as to double it by the end of X Five Year Plan. In this context, increasing milk, egg and meat production assumes importance.

  2. Presently, more than 75% of the milk produced in the country is handled by the unorganised sector. The qualitative aspects relating to handling of milk need addressing. Small milk producers need to be encouraged to come into the organised sector and use the latest technology to improve quality. In poultry sector, we have productivity comparable with accepted standards. However, there exists large scope for value addition in this sector and make the products reach wider markets within the country and abroad. This will trigger in multiplier effects both in production and employment.

  3. Government of India have, therefore, created a corpus fund called “Venture Capital for Dairy and Poultry Sectors” with a view to providing bank loan to the entrepreneurs with certain incentives for undertaking certain activities in the sectors.

  4. The scheme covers all the districts in Orissa. However, under dairy sector, financing for establishment of small dairy farms under the scheme will be limited to Non Operation Flood Districts i.e. Other than undivided Cuttack, Puri, Dhenkanal, Keonjhar and Sambalpur districts.

  5. Under the scheme, financial assistance is available to the entrepreneurs as below:

    • 50% of the Project Cost as Interest free loan from the bank.
    • 40% of the Project Cost as Loan with interest from the bank. Interest as applicable to agricultural    advances is charged by the banks on this portion. Prompt repayment will enable the borrowers for further concession of 50% of the interest paid on this bank loan component.
    • Remaining 10% of the Project Cost as Down Payment by the borrower.

      The 50% interest free portion and interest subsidy of 50% of the interest payable will be provided by Govt. of India from the Revolving Fund being set up in NABARD. Bank’s controlling office will submit consolidated claim for 50% interest free portion, activity wise, to NABARD R.O. on fortnightly basis. Adjustment of subsidy towards 50% of the interest paid will be claimed by banks annually from NABARD from the 2nd year onwards on a reimbursement basis. On receipt of the interest subsidy form NABARD the amount will be credited to the borrower’s loan account. 

     

  6. Bank should recover the loan amount as per the instalments prescribed and pass the interest free potion, on pro rata to NABARD on yearly basis. Any deficiency in repayment will be the responsibility of the bank as the borrowers are to be identified and selected by them. Bank should repay the interest free portion of the loan to NABARD as per the repayment schedule fixed. Repayment period of loan will depend upon the cash flow and will be up to maximum of 9 years including grace period of two years depending on the activity.

  7. The scheme will be implemented with an allocation of Rs. 25.00 Crore for the country as a whole during the remaining period of X Five Year Plan. Individual or composite activities viz. Milch animal unit (upto 10 animals) with modern equipment etc. could be financed. The fund will be distributed between Dairy and Poultry activities with an overall ratio 2:1 at the National level. The scheme is open for implementation in all the districts by all the CBs, RRBs & Cooperatives.

  8. Scheme proposals received from entrepreneurs have to be appraised by banks as per the norms. A State Level Review and Disbursement Committee (SLRDC) is to be constituted involving representatives of the leading banks in the State and Department of Animal Husbandry, Dairying of the State Government as members. This committee, headed by the Chief General Manager, NABARD will review the claims received from banks and sanction 50% of the project outlay as interest free loan as per the guidelines. Based on the sanctions of the committee, NABARD will released the amount to the financing bank. The bank should ensure that final disbursement is made within 8 days of release of the amount form the revolving fund. Proposals under the fund will be entertained on first-cum-first served basis and the releases are subject to the availability of funds from Govt. of India. Flow chart of the funds under the scheme is given in Annexure – I. Details of the activities covered and their maximum cost that could be considered under the scheme are given in Annexure – II.

  9. For firming up the action points, we propose to convene a meeting of all banks. Department of Animal Husbandry and Veterinary Services and OMFED at the conference hall of our Regional Office at 3.00 P.M. on 27th July 2005. You are requested to kindly attend the meeting. Based on the discussions and consensus arrived in the meeting, we can give a shape to SLRDC.

  10. The implementation of the scheme (Flow of loan applications, receipts, processing, sanction release of funds etc.) would be monitored by SLRDC at the State Level and by the Joint Monitoring Committee at the National Level. You may please instruct all your controlling officers / branches in the State, about the details of the scheme and initiate necessary steps for its effective implementation. The consolidated claim formats may be submitted by the controlling office of the bank for release of interest free loan portion from the Revolving Fund and release of interest subsidy under the scheme. Formats are given in Annexure – III & IV respectively.

  11. NABARD will provide refinance in respect of bank loan at the existing rates as applicable to Animal Husbandry investments.

  12. Banks may intimate to us operational issues, if any, which can be deliberated in the meeting.

  13. Please acknowledge receipt.

Encl : As above.  

 

Yours faithfully,    
       Sd/-           
  (Dr. Rajan)        
Deputy General Manager

 
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