Irregularities have been found in the process of allocation of Rural Infrastructure Development Fund (RIDF) by National Bank for Agriculture and Rural Development (Nabard).
According to reports, Nabard deviated from the usual procedure followed for allocating the fund, and mistakenly allocated Rs. 2000 crore of the funds to private entities last fiscal. The total amount which was to be allocated under RIDF in the year 2011-12 was Rs. 18, 000 crore.
These funds are meant for providing direct loans to state run corporations or enterprises for warehouse financing or for development of critical infrastructure in villages. The amount is provided by commercial banks from their deficit in priority sector lending.
Nabard included private corporations as institutions eligible for receiving funds under RIDF, a noteworthy deviation from the allocation procedure it has followed for the last 16 years. In addition to this, Nabard broke another norm by advancing refinance scheme to banking institutions at higher interest rates of 8 percent as opposed to the normal interest rate of 6.5 percent.
Taking note of the violations in the two norms, RBI has written a strongly worded letter to Nabard asking it to refund the funds provided by banks for financing warehousing needs in rural areas.