frequently asked questions (FAQ's)
National Agriculture Market Scheme
How will NAM operate?
- NAM is an electronic trading platform created with an investment by the Government of India.
- It will offer plug-ins to any market yard existing in the state.
- Necessary customization shall be undertaken to conform to the regulations of each of the state Mandi Act.
Will APMC Mandis lose out business due to NAM?
- NAM increases the choice of the farmer
- Volume of business will significantly increase as there will be greater competition for specific produce, resulting in higher transaction fees for the mandis
Will NAM require separate legislation?
- No, NAM is being set up as a part of an administrative arrangement and requires no enabling legislation as an electronic platform
Who will actually operate the NAM Platform?
- SFAC will operate the NAM with technical support by Strategic Partner
- DAC shall provide budgetary grants for this initiative
Who will bear the cost of running NAM?
- National level platform is being developed by Ministry of Agriculture, which will also bear the maintenance cost
- Integration costs for local mandis and customization of software training etc shall be borne by Ministry of Agriculture as one time grant
- Running costs of the software at the local level and staff costs for quality checks shall be met by transaction fee
What are the likely benefits of NAM?
- For farmers, NAM promises more options for sale
- For local traders, NAM offers the opportunity to access a larger national market for secondary trading
- For Bulk buyers, processers, exporters, NAM offers direct participation in the local mandi trade and thereby reducing the intermediation costs
- Gradual integration will ensure common procedures for issue of licence, levy of fee and movement of produce
- Significant return expected in 5 to 7 years to all the stakeholders
- Higher returns to farmers
- Lower transaction costs to buyers
- Stable prices and availability to consumers
- Integrated value chain across country promoting scientific storage and movement of agri goods
Equity Grant Scheme
Who is the Implementing Agency?
Equity Grant Scheme is being operated by Small Farmers Agri Business Consortium ( SFAC)
What is FPC?
Farmer Producer Companies (FPC) means a company of Farmer Producer Members as defined in Part IX A of the Indian Companies Act, 1956 (including any amendments thereto or re-enactment thereof) and incorporated with the Registrar of Companies.
Who can be shareholder of the FPC?
Any farmer (Small/Marginal), landless labourer can become shareholder by contributing to Equity of the Company. For the purpose of Equity Grant Scheme a shareholder is a shareholder member of FPC on the date of its application for Equity Grant under the EGCGFS.
What are the objectives of Equity Grant Scheme?
The Equity Grant Fund has been set up with the primary objectives of :
a) Enhancing viability and sustainability of FPCs;
b) Increasing credit worthiness of FPCs;
c) Enhancing the shareholding of members to increase their ownership and participation in their FPC.
What is the Eligibility Criteria for availing Equity Grant?
An FPC shall be eligible to apply for Equity Grant under the Scheme based on its fulfilling the following criteria :
a) It is a duly registered FPC under Part IX A of the Indian Companies Act, 1956 and incorporated with the Registrar of Companies (RoC).
b) It has raised equity from its Members as laid down in its Articles of Association.
c) The number of its individual shareholders is not lower than 50.
d) Its paid up equity does not exceed Rs. 30 lakh.
e) Minimum 33% of its shareholders are small marginal and landless tenant farmers as defined by the Agriculture Census carried out periodically by the Ministry of Agriculture, Government of India.
f) Maximum shareholding by any one member is not more than 5% of total equity of the FPC.
g) Maximum shareholding of an Institutional Member is not more than 10% of total equity of the FPC.
h) It has a duly elected Board of Directors (BoD) with a minimum of five members, with adequate representation from member farmers and minimum one woman member.
i) It has a duly constituted Management Committee responsible for the business of the FPC.
j) It has a business plan and budget for next 18 months that is based on a sustainable revenue model as may be determined by the implementing Agency.
k) It has an account with a “Bank”.
l) It has a Statement of Accounts duly audited by a Chartered Accountant (CA).
What is the sanction limit under Equity Grant Scheme?
The Equity Grant shall be sanctioned to eligible FPCs as follows:
a) Equity Grant shall be a cash infusion equivalent to the amount of shareholder equity in the FPC subject to a cap of Rs. 10 lakh per FPC.
What are the criteria for calculation Equity Grant?
The criteria for calculation of Equity Grant rounded off to the share unit value subject to the above limits to each shareholder member of the FPC as per authenticated copy of the shareholders register maintained by the Producers Company is as follows :
a) Allocation of shares shall be on matching/pro-rata basis of the shareholders’ current shareholding, subject to the maximum specified above and ensuring that each shareholder member receives minimum one equity share.
b) If the Grant sanctioned to the FPC is not sufficient to ensure a minimum one share to all its shareholder members, allocation of grant shall be based on the shareholders ‘current landholding, starting with shareholder with the least land holding/the smallest producer in case of allied activities/ or by transparent draw of lots where such identification is not possible.
How many times Equity Grant can be sanctioned.?
The FPC shall be allowed to draw the Equity Grant in a maximum of two tranches (within a period of 2 years of the first application) subject to the cap of Rs. 10.00 lakh per FPC, provided and to the extent that it is able to raise additional Member Equity to qualify for an additional matching grant within the overall ceiling of Rs. 10.00 lakh. The request for the second tranche shall be treated as a fresh application and the full process of due diligence shall be repeated.
What is the impact if a member exits the FPC after sanction of Equity Grant?
In the event that a shareholder, who receives additional shares issued by the FPC against Equity Grant sanctioned by SFAC, exits the FPC at any point after receiving the shares, the additional shares received by him/her name must be transferred to another shareholder or new shareholder within 90 days of his/her exiting the FPC, through an open and transparent draw of lots. In such cases, the original shareholder cannot receive the value of the additional shares transferred to other/new members.
Under what circumstances, SFAC can recall the Equity Grant amount from the FPC?
SFAC shall have the right to recall the Equity Grant amount from the FPC which shall be legally liable to comply with the same in the case of :
a) Failure to issue additional shares to members against the Equity Grant received by the FPC within 45 days of its receipt, and
b) Closure/Dissolution of FPC within three years of the receipt of the Equity Grant.
c) Instances of misuse / misappropriation of the Equity Grant (viz. Use of funds for activity other than mentioned in Memorandum of Association/Articles of Association/Business plan of the FPC) of the Equity Grant.
What is the Application process for Equity Grant?
Eligible FPCs that meet the eligibility criteria shall apply for the Equity Grant in the prescribed Application Form only. Other mandatory documents required to be submitted along with the application are listed below :
i) Shareholder list and share capital contribution by each member verified and certified by a Chartered Accountant (CA) prior to submission.
ii) Resolution of the FPC Board/Governing Council to seek Equity Grant for members.
iii) Consent of shareholders, stating name of shareholder, gender, number of shares held, face value of shares, land holding, signifying consent for SFAC to directly transfer the equity grant sanctioned to the FPC on their behalf, to FPC Bank account, against the consideration of additional shares of equivalent value to be issue to them by FPC and on exit – transfer of the shares as per rules.
iv) Audited financial statements of FPC.
v) Photocopy of Bank Account Statement for last six months authenticated by the Branch Manager of the “Bank”
vi) Business Plan of FPC and budget for next 18 months.
vii) Names, photographs, and identity proof (any one from among ration card, Adhaar Card, election identification card, passport) of Representatives/Directors authorised by the Board for executing and signing all documents under the Scheme.
viii) Each page of the Application form and accompanying documents shall be signed by a minimum of two Board Member/Authorised Representatives of the FPC.
For Clarifications in respect of points no. I, ii & iii, please refer our Circular No. SFAC/EGSC/2014-15/1295 dated 01/07/2014 (available at our website : www.sfacindia.com)
What is the process of Institutional Due Diligence?
The Implementing Agency shall undertake a due diligence process to establish the credibility, sustainability and viability of the FPC, before taking a decision on its application for Equity Grant. The due diligence shall cover the following aspects :
b) Business and Business Plan Viability
c) Management Capability;
Due diligence shall be conducted through Desk Appraisal on the basis of documents received and a Filed Visit to the FPC and its Promoter Organisation if applicable.
Who is the Sanctioning Authority for sanction of Equity Grant?
An Equity Grant Sanction Committee (EGSC) with four members, the Managing Director SFAC as Chairman, two officers of the organisation nominated by MD, SFAC, is constituted for the purpose of evaluating applications received under this Scheme. The EGSC, meeting under the Chairmanship of MD, SFAC, shall have full authority to decide on the applications and its decision in this regard shall be final.
Sanction of Equity Grant by EGSC shall be conveyed to the FPC through a Sanction Letter issued within seven working days of the decision of the EGSC.
What is the process of disbursement?
After accepting the terms of sanction, the FPC shall enter into Agreement with SFAC.
SFAC shall transfer sanctioned funds to the FPC Account.
What are the post disbursement formalities?
The FPC shall submit the following documents to SFAC:
i) List of additional shares issued by it to its shareholder members under the Scheme along with the respective Folio Numbers, verified and certified by a Chartered Accountant (CA) within 45 days of the funds having been received by it.
ii) Copy of application with enclosures submitted to the RoC for increasing Authorised/Paid up Capital.
What action will be taken if FPC is not able to comply with terms of sanction?
If the FPC does not honour its commitment in any manner whatsoever, either in the matter of issuing shares or in notifying SFA within the specified time limit, the Equity Grant amount sanctioned and released by SFAC to the FPC is liable to be cancelled and recalled by SFAC as detailed in the Agreement between SFAC and FPC.
What is the legal process for recovery of Equity Grant in case of default occurs?
In the event of violation of any of the terms and conditions herein contained or contained in the rules or any of the instructions issued by SFAC from time to time or instances of misuse/misappropriation of the Equity Grant sanctioned and released to FPC by SFAC, SFAC shall have the right to demand and enforce forthwith repayment of the entire amount of Equity Grant sanctioned by SFAC.
The Agreement between SFAC and the FPC is governed and construed according to the laws of India. Controversies and claims arising out of/relating to this Agreement, or the breach thereof, shall be settled through Legal process or Arbitration at Delhi. However, before taking any legal action, the parties shall endeavour to mobilise all efforts and to enter into discussions in order to find a mutually acceptable settlement by direct negotiation.
Credit Guarantee Fund Scheme
What is the objective of Credit Guarantee Fund Scheme?
The Fund has been set up with the primary objective of providing a Credit Guarantee Cover to Eligible Lending Institution (ELI) to enable them to provide collateral free credit to FPCs by minimising their lending risks in respect of loans not exceeding Rs. 100.00 lac.
Who is Eligible Lending Institutions (ELI)?
Eligible Lending Institution (ELI) means a Scheduled Commercial Bank for the time being included in the second schedule to the Reserve Bank of India Act, 1934 and Regional Rural Banks, NCDC, NABARD and its subsidiaries, NEDEFI or any other institution (s) as may be decided by the SFAC Board or as directed by the Government of India from time to time.
Who is the Implementing Agency?
The Scheme is being operated by Small Farmers Agri Business Consortium (SFAC) through lending Institutions.
What does “AMOUNT IN DEFAULT” means?
Amount in Default means the principal and interest amount outstanding in the account (s) of the Farmer Producer Company (FPC) borrower in respect of term loan and working capital facilities (including interest) as on :
i) The date of the account becoming NPA ; or
ii) The date of lodging claim application/recall of advance, whichever is earlier; or
iii) Such of the date as may be specified by SFAC for preferring any claim against the guarantee cover;
Subject to a maximum of amount Guaranteed and shall not include penal interest, other charges and any other costs debited to the FPC by the Eligible Lending Institution (ELI).
What does “AMOUNT IN DEFAULT” means? Which Credit Facility is covered under the scheme?
Any financial assistance (fund based and/or non- fund based) already sanctioned/extended within six months from the date of the application for the Guarantee Cover or intended to be extended singly or jointly by one or more than one ELI to a single eligible FPC borrower by way of term loan and/or working capital/composite credit facilities without any Collateral Security or Third Party Guarantee.
ELI can extend credit without any limit; however, the Guarantee cover shall be limited to the maximum guarantee cover specified under the Scheme.
Who is the Eligible Borrower?
A new or existing FPC meeting eligibility criteria laid down under the Scheme seeking credit facility from ELI under the Scheme, without any Collateral Security or Third Party Guarantee.
What are the criteria for non eligibility under the scheme?
The following credit facilities shall not be eligible for Guarantee Cover under the Scheme :-
i) Any credit facility which has been sanctioned by the ELI against collateral security and/or third party guarantee.
ii) Any credit facility in respect of which risks are additionally covered any scheme operated/administered by Reserve Bank of India/or by the Government/or by any general insurer or any other person or association of persons carrying on the business of insurance, guarantee or indemnity.
iii) Any credit facility, which does not conform to, or is in any way inconsistent with, the provisions of any law, or with any directives or instructions issued by the Central Government or the Reserve Bank of India, which is, for the time being in force.
iv) Any credit facility granted to any borrower, who has himself availed of any other credit facility covered under this scheme or under the schemes mentioned in clause (i), (ii), and (iii) above at any point in time.
v) Any credit facility that is overdue for repayment/NPA taken over by the ELI from any other lender or any other default converted into a credit facility.
vi) Any credit facility which has been rescheduled or restructured on becoming overdue for repayment.
vii) Any credit facility which is overdue for repayment.
What are the criteria for non eligibility under the scheme? What is the application process?
The ELI shall be required to apply to SFAC for Guarantee Cover in the specified form only. For credit proposals sanctioned by them during any quarter prior to expiry of the following quarter viz. Application w.r.t. credit facility sanctioned in April-June Quarter must be submitted in the ensuing quarter, i.e. July-September to qualify for consideration under the Scheme.
How much cover is available?
ELI shall be eligible to seek Guarantee Cover for a credit facility sanctioned in respect of a single FPC borrower for a maximum 2 times over a period of 5 years.
i) Maximum Guarantee Cover shall be restricted to the extent of 85% of the eligible sanctioned credit facility, or to Rs. 85.00 lac, whichever is lower.
ii) In case of default, claim shall be settled up to 85% of the amount in default subject to maximum cover as specified above.
iii) Other charges such as penal interest, commitment charge, service charge, or any other levies/expenses, or any costs whatsoever debited to the account of FPC by the ELI other than the contracted interest shall not qualify for Guarantee Cover.
iv) The cover shall only be granted after the ELI enters into an agreement with SFAC and shall be granted or delivered in accordance with the Terms & Conditions decided upon by SFAC from time to time. SFAC shall
i) Scrutinize the proposal before sanctioning the Guarantee Cover to the ELI under the Scheme in accordance with the Terms and Conditions of the Scheme.
ii) Insofar as it may be considered necessary, for the purposes of the Scheme, inspect or call for copies of the Books of Account and other records (including any Book of Instructions or Manual or Circulars covering general instructions regarding conduct of Advances) of the Lending Institution or of the Borrower from the Lending Institution.
iii) Such inspection shall be carried out either through the officers of SFAC or any other agency appointed by SFAC for the purpose of inspection.
iv) The Investment and Claims Settlement Committee (I&CSC) shall sanction the Guarantee Cover to the concerned Bank based on the findings of the above.
The Fee payable to SFAC by the ELI for Guarantee Cover in respect of a FPC Borrower under the Scheme is a onetime Guarantee Fee calculated @ 0.85% of the sanctioned Credit Facility, subject to a maximum of Rs. 85000/- (Rs. Eighty Five Thousand only).
i) The Fee shall be paid upfront to SFAC by the Lending Institution availing of the Guarantee for each loan account. The payment is to be made within 30 days from date of approval of the Guarantee or such date as is specified by SFAC, failing which the Guarantee is liable to became void unless and until its continuance is specifically approved by SFAC.
ii) As on the date of acceptance of Guarantee Fee from the ELI, SFAC shall ensure that :
a) Any dues of the FPC borrower to the lending institution have not become overdue and/or are not an overdue/NPA credit facility taken over by the ELI and/or/is not a Credit Facility which has been rescheduled or restructured on becoming overdue.
b) The business or activity of the borrower for which the Credit Facility was granted has not been ceased.
c) The credit facility has not been utilised, wholly or partly, for adjustment of any debts deemed bad or doubtful of recovery.
Are there other charges in addition to One time guarantee fee?
In addition to onetime Guarantee Fee, an Annual Service Fee @ 0.25% per annum or such other rate or limit as may be decided from time to time per loan account shall be charged from ELIs to keep the Guarantee of SFAC live. The annual service fee shall be paid by ELI to SFAC by the 31st May each year.
How Guarantee can be invoked?
The ELI may invoke the Guarantee in respect of Credit Facility within a maximum period of one year from the date of NPA and after initiation of recovery process by ELI.
How claim would be settled?
SFAC shall honour 75% of the Guaranteed amount in default subject to a maximum of 75% of the guaranteed cap amount, on submission of claim by the ELI where appropriate action for recovery has been initiated. Balance 25% shall be paid on conclusion of recovery proceedings by ELI. SFAC shall pay claims found in order and complete in all respects, within 90 days.
Is there any provision of General awareness/publicity/training programme?
AFC is engaged to generate awareness about the benefits of CGFS to FIs, PSUs, SCBs, RRBs and last but not the least FPC. Services of Banking Institutions/NABARD and its subsidiaries shall also be engaged for sensitizing Branch Managers & other functionaries about the Scheme.
(I) ELI obtains CG for a FPC for a lesser amount in 1st phase. In 2nd phase fresh loan either term loan or enhancement of working capital is taken. Can credit guarantee upto the remaining eligible amount i.e. Rs. 85 lakh be given?
(ii) What will be the tenure of 2nd guarantee?
Validity of Guarantee starts from the date of issue. Hence the tenure of 2nd guarantee will be 5 years from the date of issue.
(iii) How many times it can be issued?
Can be issued two times within a span of 5 years.
Whether FPC is eligible for full amount of CG if it repay/prepay a loan with in a period of 5 years for which CG for lesser amount has been availed. What will be its tenure?
Credit Guarantee is issued for maximum 85% of loan amount with a cap of Rs. 85000/-. A fresh guarantee for balance amount can only be taken and will run for five years from the date of issue.
FPC has taken loan from one bank may be against some collateral security. Now take loan from other ELI without offering collateral security. Whether Credit Guarantee can be given for the loan given by the 2nd bank without collateral security.
Can be allowed subject to all terms and conditions met within the scheme.
Some projects which are otherwise viable are not able to avail this facility only due to the stipulation that total facility should be collateral free for availing benefit under CGFS. With a view that good projects are not denied the facility only because they need more credit than stipulated in the scheme. Whether, stipulation of collateral free loan can be restricted to loan as specified in the scheme and loan exceeding this limit can be collateralised.
Yes provided charge of collateral security taken for addl. Loan is not extended on collateral free loan.
In some states, SFCs are more proactive in financing of FPCs particularly, in Kerala where number of coconut producer companies are getting loan from KFC. Can SFCs be considered for inclusion in the list of ELI?
It can only be considered when review of CGFS would be undertaken.
If ELI give in writing that ELI agrees ‘In Principal’ to sanction collateral free loan, can ‘In Principal’ approval be given by SFAC to give Credit Guarantee
If ELI gives its “In Principal” intention in writing about sanction of loan without collateral, SFAC may give its “In Principal” consent to issue Credit Guarantee on usual terms & conditions.
Is takeover of a credit facility (guaranteed by SFAC) by other bank is permitted? Whether fresh guarantee would be needed or the same guarantee would be valid for transferee bank?
It can be permitted with the consent of SFAC and original bank provided transferee bank has entered in MoU with SFAC. Fresh letter of guarantee would be issued in favour of 2nd Bank.
If assets and liabilities of a FPC is taken over by other FPC, will credit guarantee will also be available to transferee FPC?
Credit facility may be transferred to other borrower with the consent of SFAC and eligibility of the transferee borrower and subject to fulfilling of all terms and conditions.
Suppose FPC singly does not qualify for Credit Guarantee for want of minimum 500 members and join few other FPCs to make them eligible for Credit Guarantee. Is it possible?
Yes it is possible, provided FPCs jointly register a new Company which will be treated as FPC and eligibility and other terms & conditions are as per scheme guideline.
Can a credit facility extended to a borrower against a collateral security be covered under the Guarantee Scheme, if the lending institution relinquishes its rights on the collateral security?
Yes, provided the lending institution relinquishes its rights on the collateral assets and releases the same in favour of the borrower before seeking guarantee cover and subject to fulfilment of the other norms of the Scheme.
Venture Capital Assistance Scheme
What is VCA?
Venture Capital Assistance is financial support in the form of an interest free loan provided by SFAC to qualifying projects to meet shortfall in the capital requirement for implementation of the project.
What are key objectives of the scheme?
1. To facilitate setting up of agri-business venture in association with banks.
2.To catalyze private investment in setting up of agri-business project.
3. Increasing rural income and employment.
4. To strengthen backward linkage of agri-business project with producers.
5. Assign producer groups and agriculture graduates to enhance their participation in value chain.
What are the benefits of VCA to Small farmers How do entrepreneurs benefit from VCA?
It encourages farmers to diversify into high value crops aimed to increase farmer’s income and assured access to markets for their crops by linking their produce to the agribusiness unit.
It encourages farmers to diversify into high value crops aimed to increase farmer’s income and assured access to markets for their crops by linking their produce to the agribusiness unit.
Who can avail VCA?
Assistance under the scheme is available to Individuals, farmers, producer groups, partnership/ Proprietary firms, self help group, Companies, agripreneurs, units in agri-export zones and other agri-preneures , intending to set up related agri-project.
What type of project qualifies for VCA?
Projects can be in agriculture or allied sector, Dairy and Poultry units are also eligible under the Scheme
Which are the eligible financial institutions under the scheme?
Financial Institutions, notified by the RBI where ownership of the Central/State Government is more than 50% such as national banks, SBI and its subdivision, IDBI,SIDBI,NABARD,NCDC,NEDFi,RRBs and State financial corporation can recommend proposal after sanction of Term Loan.
What should be the minimum cost of project to qualify for VCA?
Minimum cost of project should be Rs. 15 lakh. In North Eastern and Hilly States minimum cost is Rs. 10 lakh.
What are the other qualifying factors for a project to be eligible to receive VCA?
1. Project should provide assured market to farmers and/or producer groups.
What is the eligibility amount under VCA scheme?
a) North East and Hilly states: 40% of equity or Rs. 50 lakh, whichever is less .
(b) Rest of the country: 26% of equity or Rs. 50 lakh whichever is less.
(c) 40% of equity or Rs. 50 lakh whichever is less for FPCs
Can higher VCA be sanctioned by SFAC in special circumstances?
Yes executive committee of SFAC has power to consider projects for higher amount of VCA to deserving projects on recommendation of the bank on merits and such projects are located in Hilly/North Eastern States and pre-identified Districts declared Backward under planning commission’s Backward Region Grant Fund Scheme. However, cost of such projects should not be more than 10.00 crore.
Is VCA subsidy?
No it is an interest free loan.
Is it mandatory requirement of sanction of Term Loan by banks/FI for VCA?
Yes, it is mandatory. Self funded projects are not covered.
Is it necessary that the proposal should be forwarded through Banks/FI?
Yes, it is necessary that proposal is forwarded and recommended by the lending bank/financial institutions to SFAC. Promoters may however submit advance copy of their application to SFAC.
Is disbursal of TL mandatory before VCA?
Yes at least 50% of Term loan should have been disbursed before execution of documents for VCA.
Can VCA be remitted in Promoter’s A/C?
No, VCA being part of means of finance of the project, it is remitted to landing Bank so as to disburse the funds to promoters to complete the projects.
When will VCA be repaid back to SFAC?
VCA is to be repaid back to SFAC after the schedule date of last instalment of Bank’s term loan. Promoter may however opt to repay VCA in four equal quarterly instalments with interest as applicable on Bank’s term loan after scheduled date of last instalment of Banks Term Loans.
Is VCA confined to some states of India?
No, VCA is available for eligible projects across the country. Projects in north eastern and hilly states are given relaxation in cost and eligibility norms.
How much time will it take to process the case?
Generally from 60 to 90 days, depending upon the submission of desired documents by finance institutions