What is revolving Fund Assistance?

      Fund Assistance

  Revolving fund means a fund established for a certain purpose, such as making loans, with the stipulation that repayment to the fund may be used a new for the same purpose.

         As  per dictionary revolving fund means account established to finance a continuing cycle of operations through amounts received, such as a working capital fund.

Revolving Fund Assistance (RFA) of NABARD

       NABARD has been providing RFA on selective basis to those NGOs/MFIs which are experimenting various model of micro finance, especially in the area where sustainability of the system is yet to be established. The assistance is aimed at facilitating the supported agencies to provide funds to the disadvantage and excluded strata of the society at an affordable cost.

Eligibility Criteria

• NGOs/MFIs/NBFCs which are working in the field of rural development for three year and minimum two year experience  in micro fiance.
• MFIs should have been rated by Credit Rating Agencies approved by NABARD, if the loan outstanding of the MFIs exceeds Rs 50 lakh.
• RFA with a ceiling of Rs 10 lakh per entity for start  up MFIs and on case to case basic to other than start up MFIs subject to a  maximum of 10 crore per entity.
• MFIs should not charging usurious rate of interest from the ultimate client and effective ate of interest  including all charges should not normally be more than 25% p.a.
• Rate of interest : The rate of interest charged by NABARD on RFA at present is minimum at 35% p.a and to a maximum of  3% above bank rate p.a.
• Repayment period : 5 to 7 year inclusive of one to two years of moratorium  period.

              NABARD has been extending Revolving Fund Assistance on a selective basis , to  Microfinance  Institutions (MFIs) for on lending to SHGs and individual member of SHGs. Revolving Fund Assistance is extended to help  the MFIs to establish their credit rating so that they can access  funds from other financial institutions for their microfinance operation later. Till 31.3.2011, 42 MFIs were sanctioned Revolving Fund Assistance to the extent of  Rs6078.60 lakh. The actual amount drawn was Rs 5725.40 lakh and the outstanding as on 31.3.2011 was Rs4615.19 lakh.