The National Minorities Development & Finance Corporation (NMDFC) has numerous financial funding schemes in place to encourage entrepreneurs from the Minority population in setting up their business units. One such scheme is the Term Loan Scheme – Credit Line 2 under the Self Employment Lending Scheme. This scheme confers low interest term loans to projects with a cost of less than Rs.30 lakhs.
The National Minorities Development and Finance Corporation (NMDFC) was incorporated as a Govt. Company on 30th Sept.,1994 under Section 25 of the Companies Act, 1956 with the sole purpose of promoting economic and developmental activities in favour of ‘Backward Classes’ among the Minorities, priority being given to the women occupational group. The Muslims, Christians, Sikhs, Buddhists and Parsis have been notified as ‘Minorities’ by the Central Government under the National Minorities Commission Act, 1992. Jain community was also added info the list of notified Minority Communities in January 2014.
Additional Reading: Personal Loan for Self Employed
Objectives of the Scheme
The foremost objective of the scheme is development of backward classes among the minorities with special focus on women. Broader objectives include the following:
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Deliver financial support by loans and advances for economically and financially viable schemes and ventures to individuals or groups of individuals belonging to minorities
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For the advantage of minorities, encourage self-employment and other projects
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To issue loans and advances at interest rates decided from time to time in accordance with the Central Government or the Reserve Bank of India guidelines or schemes
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Extending loans and advances to qualifying minority members to obtain general, professional and technical training for graduate and higher-level education
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To assist in developing technical and entrepreneurial skills of minorities to manage production units properly and efficiently
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To support organizations at the State level concerned with minority growth by providing financial assistance or equity contribution and receiving commercial funding or refinancing
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To act as a central body to organize and track the work of all Corporations, Boards and other bodies set up by the State Government & Union Territory Administrations for or responsible for assisting minorities in their economic development
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To assist in the implementation of government policies and programs for the growth of minorities
How is funding extended by NMDFC under the scheme?
The NMDFC disburses this financial aid predominantly through the State Channelizing Agencies (SCAs) appointed by the respective State & UT Governments to reach the ultimate beneficiaries. The NMDFC is funded by the Central Government & the respective State Governments and Union Territory Administration, thus its equity is contributed by the Government of India, the State Governments and Union Territory Administration and also by institutions and organizations involved in the upliftment of minorities. Another channel is the network of NGO/SHGs for micro-credit.
The Corporation's mission is to provide concessional credit to the disadvantaged sections of minorities for self-employment activities. NMDFC funding schemes have been divided into two categories with differential loan and interest rates for recipients from different income groups
| Type | Sub-categories | Particulars |
| Credit Line 1 |
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Concessional credit based on existing income levels |
| Credit Line 2 | Concessional credit primarily aimed at minority people |
Term Loan Scheme for Minority Population under Credit Line 2
Snapshot of the scheme
| Parameters | Scheme details |
| Loan Amount | Up to Rs.30 Lakhs |
| Rate of Interest for beneficiaries | 8% p.a. for male beneficiaries 6% p.a for women beneficiaries |
| Rate of Interest charged from SCAs | 3% (Margin) |
| Moratorium period | 6 months |
| Repayment tenure for beneficiaries | 5 years |
| Repayment tenure for SCAs | 8 years |
| Quantum of financing ratio NMDFC : SCA : Beneficiary |
90:05:05 |
| Utilization period | 3 months |
Key features of this scheme
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The scheme primarily targets Minority population, defined on the basis of ‘Creamy Layer’ criteria of OBC. This consists of households with income of Rs.6 lakhs p.a
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Projects with a cost of Rs.30 lakh are considered for financing. 90% of the project cost subject to a maximum of INR 27 lacs can be availed as financing. The remaining cost of the project is met by the SCA and the beneficiary.
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All individuals meeting the NMDFC requirements can apply
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SCAs have the authority to sanction the loan to the beneficiaries upon their own discretion
Additional Reading: Government Loans for Small Businesses
Quantum of Loan offered
Projects of up to Rs.30 lakhs can be financed under the scheme. However, the SCAs should contribute a margin of 5% and the final beneficiary should contribute 5% and hence the total loan amount disbursed by NMDFC is Rs.27 lakhs.
Security for the loan
The SCAs may seek security from the beneficiary as per their internal guidelines. However, the SCAs should ensure that the applicant is able to get the required financing without the burden of inflated security requirements. General guidelines pertaining to Security for this loan are setup by the NMDFC
| For loans up to Rs.1,00,000 | Self-Guarantee & Post Dated Cheques |
| For loans exceeding Rs.1,00,000 and up to Rs.5,00,000 | Guarantee of one employee of PSU/Govt./Bank or one income tax payee/ Public Representative & Post Dated Cheques |
| For loans exceeding Rs.5,00,000 | Guarantee of two employees of Govt./PSU/Bank or two income tax payee/ Public Representative or Guarantee from owner of property which is pledged as collateral Or Collateral by way of mortgage of landed property/immovable property of equal value Or Post Dated Cheques |
In addition, the SCAs are also recommended to become a member of the Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) to assist beneficiaries who are not in a position to provide collateral protection for the NMDFC loan. In such a scenario, the interest rate paid by the borrower will increase for fee payments to the CGTMSE
Who are the targeted beneficiaries of the scheme?
Broadly, the eligible members are termed as Minorities. However, for operational convenience, the proposals are categorized into the following groups
Agriculture & Allied Products - This includes schemes such as animal breeding, poultry farming, bee- keeping etc.
Technical Trades - These include technical trades at village and taluk level such as electrician, plumber, sheet metal, TV, radio repair, motor mechanic, tyre puncture repair, cycle, taxi, auto rickshaw repairing and vulcanization, refrigeration mechanic etc.
Small-Businesses - These include small businesses like tea shop, pan shop, egg sale, general provision shop, laundry, popcorn, text book shop, magazine shop, newspaper vendor, photocopier service, typing and word processing service etc.
Artisan and Traditional Occupations - Occupation includes embroidery work, wood carving, safety match box manufacturing, manufacturing of papad, jams, pickles, ready-made garments etc.
Transport & Services Sector - Includes operating auto-rickshaws, cycle rickshaws, tempos, bullock and other animal driven carts for hire, cycle hiring service etc.
End note: NMDFC's Lending Policy emphasizes NEED BASED FINANCING, i.e. funding according to the needs of the beneficiaries (project nature, amount of funds) and area needs (number of units). To achieve this goal, SCAs are assigned with competences and required freedom and flexibility in their work. Special initiative are being taken among the targeted minority groups to carry out NMDFC schemes & programs publicity. Arranging Loan Mela cum Awareness Camp became a mandatory part of the loan, and SCAs are encouraged arrange such loan melas for increased disbursal of this loan.