GUIDELINES FOR DIRECT FUNDING BY NCDC

GUIDELINES FOR DIRECT FUNDING BY NCDC

Annexure-I(H)

A.            CRITERIA FOR DIRECT FUNDING

I             Eligibility  criteria :

i)             NCDC may extend direct assistance to existing cooperative societies in operation for not less than three years.

ii)            Routing of NCDC assistance will be as follows:

a)            Projects of Rs. 10 lakhs and above but not exceeding Rs. 5 crores, subject to the eligibility criteria, may be considered for direct funding.

b)            NCDC assistance other than (a) above would continue to be routed through State  Governments or directly against Government guarantees.  Even with regard to (a) above the assistance may be routed through the State Government or directly against Government guarantee at the willingness of the State Government.

         

c)             In exceptional cases, for the cooperatives which are financially very strong, have good track record of operations and credit worthiness, projects above Rs. 5 crores (including working capital loan) may be considered for direct funding with the approval of the Board.

d)             Multi state cooperative would continue to be assisted directly, subject to the eligibility criteria, irrespective of the amount involved.

iii)            The society should have positive net-worth, not less than 100% of paid-up share capital i.e. there should be no erosion in the paid-up share capital.

iv)            The society should not have any cash losses during last three years and there should be net profit in at least two of previous three years.

v)             The debt equity ratio will normally be 65:35 depending on economic viability of the project.

vi)             Value of assets to bemortgaged to NCDC as security against the loans should have adequate security margin, normally not less than 1.5 times (shortfall in the security may be made good by way of guarantee of a scheduled bank or an FDR endorsed in favour of NCDC.

vii)              Working capital loans to cooperative societies/federations may be secured by hypothecation of stocks/debtors/other assets, keeping in minimum margin of 20% .  If considered necessary, NCDC may ask for additional security of first or second charge on the fixed assets.

viii)             If considered necessary, the society may be asked to open an Escrow account with a scheduled bank/State Cooperative Bank/District Cooperative Bank in which past of sale procedure will be deposited for servicing NCDC loan.  In case Escrow account is opened with a District Cooperative Banks, its financial position may be ascertained.

ix)              Audit of accounts should be completed upto previous year within 6 months of close of the financial year.  In cases where audit is undertaken by Government auditors and it is not complete, in such cases accounts audited by Chartered Accountants firm will be submitted.

x)              The society seeking NCDC assistance, or any other society on which directors of this society have been directors, should not have any major default in repayment of loans to NCDC/banks/financial institutions.

xi)              NCDC, at its discretion, may ask for additional securities by way of one or more of the following:

-                Government guarantee

-                Guarantee of scheduled bank

-                Personal guarantee of the Directors and collateral security

2.              New Cooperative Societies :

                 The cooperative societies which are not in operation for more than three years, will normally be assisted through State Governments.  However, such cooperatives in exceptional cases  may be considered for direct funding, if in addition to the eligibility criteria indicated in para 1 above (as applicable), following additional securities are made available.

i)         Government guarantee or guarantee of a scheduled bank

ii)         Personal guarantee of the Directors and collateral security, if considered   

     necessary. 

3.        Releases :

i)         NCDC will consider release of 25% ways & means advance only after the society has raised 50% and utilized 40% of equity portion of the project by way of members/State Government share capital and internal accruals.

ii)        As per existing procedure, subsequent releases will normally be considered based on the expenditure incurred and committed expenses for one month as certified by a Chartered Accountants.  For the projects involving NCDC assistance above Rs. 10 crores or as decided  by Managing Director, NCDC such certification may be carried out by a Chartered Accountant from the panel approved by NCDC.