In its ongoing efforts to strengthen the country’s agri-sector, the National Bank for Agriculture and Rural Development (Nabard) has decided on a 90 per cent refinance scheme for setting up rural godowns across the country.
Under the ‘Rural godowns scheme’ (RGS), Nabard will provide refinance to banks extending loans for the construction of godowns. Nabard has already submitted the scheme to the government for its approval, after which the RGS may be linked with government subsidy.
According to the scheme, the promoters will first have to involve margin money (down payment) of 25 per cent of total project cost. The balance 75 per cent will then be funded by way of a loan from banks.
According to Nabard, the capital cost of the project will be around Rs 2,000 per tonne of the capacity created. This outlay is inclusive of the cost of land and its development, preliminary and preoperative expenses and miscellaneous provisions. The cost of the land will be around Rs 1 lakh per acre of land which comes to around Rs 20 per tonne of the capacity created.
The main criterion for a farmer or promoter, wanting to avail a loan through the RGS, is to have a plot of land for the construction of the godown on ownership basis. Besides, the rate of return on the godown should be at least 15 per cent, for the loan application to be approved. The loan under the scheme will be secured by the mortgage of the land and the godowns contructed thereon.
The plans, designs and the estimates for the project will first have to be approved by a competent authority before the bank decides to process the loan. Also, the work of construction of the godowns is to be completed in a period of six months. In case, the magnitude of work is larger, then the proper physical and financial phasing of the project has to be notified to the lending bank.
Nabard will charge interest to the lending banks at the rate of 10.5 per cent per annum. Loans will have to repaid in about 10-15 years time, which will include the grace period. Interest rates charged to the borrower will be decided by the financing banks, as per the RBI guidelines.
Selection of the borrowers, entrepreneurs and the location of the projects will be done by the banks in consultation with the laid norms for the construction of godowns. With the