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Project Finance Scheme

Objective: To provide long term finance for the establishment of new industrial, infrastructure,
agri-horticulture, fishery and animal husbandry projects as well as expansion, diversification and
modernization of existing ones.

Types of Assistance: Term loan, direct subscription/underwriting of equity and debt instruments,
provide financial guarantee and participate in deferred payment guarantee.

Eligibility: Industrial concerns conforming to the definition in Section 2 (c) of the IDBI Act,
Infrastructure, Agro-horticulture, Fishery and Animal Husbandry projects.

Project Cost: Minimum assistance: NEDFi ordinarily finances projects with loan component of
Rs.25 lakh and above. However smaller projects in innovative fields and in the hill states are also

Maximum assistance: Normally, NEDFi can consider up to maximum exposure of 10% of paid
up capital & reserves. However, it can consider projects requiring higher investment in
consortium with other financial institutions and banks.

Nature of assistance: Rupee Term Loan

Promoters contribution: 30-40% of the total project cost. However, in the case of consortium
financing it will be at par with the norms of All India Financial Institutions.

Debt Equity Ratio: Ordinarily 1.5 : 1

Interest Rate: Based on Prime Lending Rate fixed from time to time. Actual rate within the
prevailing rate band depends upon creditworthiness of borrower and risk perception. As on date,
the prevailing interest rate is 15% per annum. There is provision for 1% rebate on interest rate for
timely repayment on due dates.

Up-front fee: 1% of the loan amount sanctioned

Security: First charge on movable and immovable fixed assets.


1. Loan Agreement.
2. Deed of hypothecation.
3. Personal guarantee from main promoters, wherever required.
4. Undertaking from the promoters for
o Meeting overrun/shortfall in the project cost/means of financing
o Non-disposal of shareholdings by the promoters
5. Undertaking from MD for non-receipt of commission, if company is in default to NEDFi.
6. Resolution under Section 293 (1)(a) and 293(1)(d) of the Companys Act.

North East Equity Fund (NEEF)


The NEEF has been created to help first generation entrepreneurs who are short of equity and
are unable to meet the conditions of banks/ financial institutions. Special focus is given on
agricultural and horticultural activities and activities with local raw material.


New projects in tiny & SSI sectors, expansion, modernization and diversification of existing units
etc. Benefits can be extended to Proprietorship & Partnership Concerns and Companies.
Technical qualification of the promoter in the relevant field is a pre-requisite.

Nature of assistance: Quasi Equity

Project Cost: Maximum of Rs. 25 lakh

Extent of Assistance:

Up to 25% of the project cost, subject to a maximum of Rs.3.75 lakh. NEEF assistance may be
supplemented with normal NEDFi loan component together with one cycle of working capital in
deserving cases.

Promoters contribution: Minimum 15%

Interest rate: Service charge of 1.5% per annum.

Repayment period: Maximum 7 years (including moratorium upto 3 years)


Pari-passu charge with Banks/SFCs/ SIDCs on the assets of the concern/company; collateral
guarantee if needed but not insisted for deserving cases; personal guarantee from the promoters.

Micro Finance Scheme

The people in North East India are predominantly in the farming sector. For trading and
production purposes, small borrowers still depend on the local moneylenders whose interest rates
are normally very high. It becomes rather heavy on the borrowers who are poor, illiterate and do
not understand the intricacies involved in formal lending. Therefore, they do not approach banks
despite their needs.

With the help of Non Government Organisation (NGOs), individuals can be organised under Self
Help Groups (SHGs) for the purpose of on-lending from financial institutions. Also, linkages can
be established for networking with these SHGs with the formal banking sector.

Despite the vast expansion of the formal credit system in the country, it has not been able to
cover adequately the need of small loan requirement of the rural poor. The banks have not been
involved much in lending of this kind as it encompasses high risk & high transaction cost and too
many small borrowers. Faced with such constraints, the unreached small borrowers can be
helped by NEDFi through the provision of small loan through intermediaries. It will lead to creation
of informal savings and help in inculcating the habit of borrowing and repaying.

NEDFis Objective

There is a need to target small and mid size agriculturist, self employed personnel, entrepreneur;
not so much as a measure of poverty alleviation but as a measure of productivity/efficiency
building mechanism to support the greater goal of overall development of the region.

Hence, NEDFi would look towards developing & supporting NGOs/Voluntary Agencies (VA) with
good track record for on-lending to the "needy" for taking up productive activities. The program
would envisage extending financial assistance to NGOs/VAs for on-lending to the people for self-
employment projects that generate income, allowing them to care for themselves and the

The Proposal:

The approach would focus on identifying micro finance institute (MFI) as long tern partners and
providing credit support for their micro credit initiatives. The MFIs may be well-organised Non
Government Organisation (NGO) with good networks or other micro finance organisations. The
MFIs would be selected on the basis of their credibility, track record, professional expertise and
management practices, credit rating, field visits etc.

Operational Strategy:

The approach to assistance under NMFS will be different from that of conventional lending under
other programs of NEDFi in as much lending decisions under NMFS will be governed by the track
record, capabilities of reach of MFIs rather than the security offered and promoters stake.

Operational Modalities:

The operational modalities of the NMFS will be as follows:

Eligible Borrower

Well managed NGOs/VAs/Cooperative Societies, Village Councils that::

are in existence for at least 3 years
have experience in developing SHG
have good track record
have proper system of book keeping
adequate financial management ability
well-organised SHGs engaged in income generating activities.


Minimum amount that can be given to a SHG is Rs 20 thousand and maximum up to Rs.
4 lakh.
NEDFi would lend the amount at Prime Lending Rate (PLR) + 0.5 % (administrative

NGOs to lend it to the SHGs/individuals at a rate determined by them after discussing

with NEDFi. In no case more than 4% above NEDFis PLR.

Repayment period by the NGO would depend on the projects. Maximum period is 5 years
including a reasonable moratorium period. The repayment period by the ultimate
borrower will be 1-3 years.

Some feasibility study of the projects sent by the SHGs should be done by the NGOs
before being accepted by NEDFi. The individual projects would be prepared by the NGOs
with details.

NEDFi would help SHGs, NGOs in identifying activities and in conducting seminars,
trainings, workshops etc..

NGO will apply as per NEDFi application format .

NGO's to please use checklist.

Activities to be financed:

Income generation through agriculture (including farm implements).

Other farming activities mainly : Piggery, Poultry, Fishery, Dairy etc.
Micro industries.
Service Sector including transportation etc.

Ultimate Target Group :

Farmers - Petty Traders

Women - Youth
Capacity Building of NGOs


Loan Agreement.
Deed of Hypothecation.
Promissory Note.
Resolution of executive body accepting the terms and conditions for availing the loan.

Hypothecation of all the movable assets of the NGO.

Promissory note from the NGO.

Working Capital Term Loan


This scheme is aimed for those units currently facing problem due to lack of working capital support from
commercial banks, but can be made viable with the infusion of fresh funds by way of one time core
working capital assistance.


1. The scheme is meant for limited companies which are industrial concerns as defined in IDBI Act.

2. Those limited companies which have not got any working capital:

a. They are defaulter in banks, but not willful defaulter.

b. They were under financed & hence running in lower capacity.
c. There is market for the product.
d. The promoters are competent and persons of integrity.
e. Technology is not outdated.

3. The Company and the unit must be potentially viable.

Quantum of Assistance:

75% of the working capital requirement of business for one cycle of operation.

Promoters Contribution: 25%

Interest rate: PLR + weightage of risk.

Repayment Period: Maximum 3 years

The borrower shall approach commercial banks for meeting its normal working capital requirement at any
time during currency of the loan. As and when the assistance is sanctioned by the bank, the working
capital loan from NEDFi should be repaid out of the proceeds of the loan sanctioned by the bank. NEDFi
in turn shall release its charge on current assets and also concede second charge on fixed assets if so
insisted by the bank.

i. First charge by way of hypothecation of current assets.

ii. Charge on fixed assets of the unit.
iii. Personal Guarantee of Promoter Director/Corporate Guarantee
iv. First pari-passu charge on the fixed assets of the unit, if the assets are mortgaged to other
institutions/ Bank
v. Adequate collateral security

Upfront fee: 1.00% of the loan amount


Equipment Finance


For acquiring specific machinery/equipment

Financially sound companies
Should be in the operation for a period of 5 years, should be making profit for the last
three years.
Must have a good track record.


Assistance under the scheme will not be available for the following:

Acquisition of second hand equipment/machinery

In- house fabrication of equipment/ machinery
Reimbursement of the cost of equipment/ machinery purchased more than 90 days prior
to the date of application.
Grass root projects or major/ expansion/ diversification, which call for detailed appraisal.

Nature of assistance: Rupee Term Loan

Extent of Assistance:
70% of cost of equipment plus taxes/duties, transportation and installation charges. Minimum:
Rs.25 lakh Maximum: Rs.10 Crore

Promoters contribution: 30%

Debt Equity Ratio: 1.5:1

Current ratio: 1.33:1

Interest coverage: 2:1

Interest rate:

Based on Prime Lending Rate fixed from time to time. Actual rate within the prevailing rate band
depends upon creditworthiness of borrower and risk perception.

Upfront fee: 1% of loan amount sanctioned

Repayment period: 3 to 6 years


Extension of first charge or hypothecation of assets financed. Personal guarantee/ Corporate


Loan Agreement
Deed of hypothecation
Demand promissory note