National Backward Classes Finance and Development Corporation

National Backward Classes Finance and Development Corporation (NBCFDC) is a non-profit organisation which is regulated under the Ministry of Social Justice and Empowerment serves for the welfare of Backward Classes. NBCFDC was mainly developed with the object of working for economic empowerment of persons belonging to Backward Classes (BC), living below Double the Poverty Line (DPL). In this article, we look at the National Backward Classes Finance and Development Corporation in detail.

Objective of NBCFDC

The objective of the NBCFDC is to provide financial assistance for the economic development of persons belonging to the Backward Class (BC).

Eligibility Criteria for Target Group

The assistance will be provided to the target group who satisfy the following conditions:

The applicant must be from the Backward Class (BC) community.
The applicant family annual income should be below Rs.98,000 for rural areas and Rs.1,20,000 for urban areas.

Eligibility Criteria for Financial Institutions

The below-following conditions have to be satisfied by the financial institutions to avail financial assistance from the NBCFDC:

must be registered with the Reserve Bank of India (RBI) as non-banking financial company-Micro Finance Institution.
should possess three years of continuous profit track record.
must follow the prescribed norms related to microfinance.
must have Gross Non-Performing Assets (NPA) less than 2% and net NPA below 0.5% as per their annual accounts at the end of the financial year.
should be the member of a Credit Bureau.
must have a minimum capacity assessment rating of mfr5 or its equivalent from the CRISIL.
should hold a proper system for internal accounting, risk management, internal audit, MIS, cash management, etc. and its annual accounts must have been audited in the last three years.

Note: The financial institution should not be the defaulter of any loans borrower from any other banks/organisation in the last three years.

Schemes of NBCFDC

The schemes introduced under NBCFDC are listed below:

General Loan Scheme
Micro Finance Scheme
SDTP scheme
Vocational Education and Traning Loan Scheme (VETLS)
Technology Upgradation of Clusters under NBCFDC Scheme

Quantum of Assistance

NBCFDC provides loans to the extent of 90% of the project cost for units costing up to Rs.50,000 per beneficiary. The remaining 10% of the share has to be contributed by the financial institution or beneficiaries. Further, the one-time grant for providing other technical interventions with the grant of Rs.50,000 will be provided by the NBCFDC to the eligible financial institution.

Rate of Interest

The interest rate charged under the scheme are tabulated below:

NBCFDC to Financial Institution	Interest Spread to Financial Institution	NBCFDC to Beneficiaries
4% per annum	8% per annum	12% per annum

Repayment Period

The loan amount has to be repaid in three instalments within a specified period of three years of each disbursement, including the moratorium period of three months. Additionally, ninety days is provided for funds utilization. Note: No moratorium period for payment of interest will be given.

Second Loan

Upon repayment of the loan, the beneficiaries are eligible to avail loan further under NBCFDC scheme from a financial institution or other channelising agencies of the NBCFDC.

Channelizing Agency (CA)

The selected financial institution will be appointed as the Channelizing Agency (CA) of NBCFDC in the selected state or Union Territory (UT). The agreement will be signed between the NBCFDC and financial institutions as per the NBCFDC Lending Policy and the terms and conditions of the agreement.

Procedure for Availing Assistance

The following procedure has to be followed by the financial institution for availing funds: Step 1: The eligible institution can forward the project proposals to NBCFDC covering the unit cost, means of finance in a separate group for Men and Women. Step 2: The proposals submitted should be the need-based economic activities, preferably in which the target group should possess practical experience or required capability to manage the business. Step 3: The NBCFDC would sanction the proposal as per the policy and guidelines of the Corporation. Step 4: After receipt of the sanction letter, the institution can request NBCFDC in writing for disbursement of funds. Step 5: The NBCFDC will disburse funds to the eligible institution on satisfying the conditions in the agreement between the financial institution and NBCFDC and NBCFDC’s Lending Policy. Step 6: Then the schemes implementing by the financial institution will be as per NBCFDC Lending Policy and the terms and conditions stipulated in Letter Of Intent (LOI). Step 7: The financial institution will utilize the Funds distributed by NBCFDC as per the Lending Policy. Step 8: The financial institution will perform the selection of the beneficiaries as per NBCFDC Lending Policy. Step 9: Then the financial institution would issue Sanction Letter to the applicants selected for the loans. Step 10: The financial institution seeks to link subsidy from concerned authorities to eligible beneficiaries with NBCFDC loan component to reduce the burden loan on the beneficiaries. Note: The financial institution will charge interest rate from the beneficiaries not more than the rate stipulated by NBCFDC.

Disbursement of Funds by NBCFDC

NBCFDC will disburse the funds allocated for the sanctioned projects on satisfying the following conditions:

Acceptance of the Letter Of Intent (LOI) by returning a copy of duly signed by an authorized signatory of the financial institution as a token of acceptance of all terms and conditions mentioned in the LOI.
For implementing the scheme, the written request is required by the financial institution for disbursement of funds.
If any funds are found unutilised at the end of preceding year that has to be refunded as per the NBCFDC lending policy.
The overall cumulative utilization percentage of funds issued by the NBCFDC should be 80% or above at the event of subsequent demand of credit and also there should not be any overdue payable to NBCFDC at the event of disbursement.

Security

Any financial institution seeking for the assistance from NBCFDC has to provide a bank guarantee or fixed deposits distributed by Scheduled Commercial Banks should be in the name of Financial institution (FI). The validity period of the bank guarantee or fixed deposit will continue until all the dues of the NBCFDC have been fully paid or otherwise fully discharged by the FI. In case of Financial Institution has provided a fixed deposit to the NBCFDC, the interest applicable on fixed deposit will be payable to the FI. In the event of default by FI either for the entire or part amount advanced under this agreement, the Bank Guarantee will be invoked, or NBCFDC will encash the fixed deposits.

Funds Utilisation

The Financial Institution can be able to utilize the funds within 90 days from the date of release of funds by NBCFDC. The FI has to send Quarterly Progress Report (QPR) on the utilization of the NBCFDC funds as per the prescribed format. NBCFDC funds distributed by the FI to the beneficiaries under the approved sector is only be considered as funds utilized.

Default in Repayments

In case of any defaults in the repayment of NBCFDC dues (principal as well as interest) beyond the specified date of repayment, then the interest at the rate of 1% per annum and above the normal rate of interest is applicable on the dues as per the Lending Policy of the NBCFDC.

Other Conditions

The financial institution should develop a Project Implementation Committee for monitoring the implementation of the project.
The financial institution should ensure that the beneficiaries are selected as the per the eligibility criteria of NBCFDC.
The funds issued for the implementation of the scheme has to be utilized within the applicable sector.
The funds transferred by the financial institution to its Branch or District Offices will not be considered as funds utilized.
The financial institution should ensure the effective monitoring of information to NBCFDC relating to the scheme during the currency of the loan.
The Letter of Intent (LoI) provided by NBCFDC to the financial institution will be valid only till the end of the financial year of issuance, and no disbursements will be made against the LoI after the expiry of the period.
The financial institution should maintain separate accounts for loan assistance received from NBCFDC.