- November 11, 2024
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Benefits under National Agri Infra Fund
The National Agri Infra Fund (AIF) presents an outstanding opportunity for businesses involved in agricultural infrastructure. The scheme, introduced in 2020 and extended until March 31, 2026, is designed to provide financial support, ease access to credit, and reduce the cost of borrowing for agri-businesses. Here’s a closer look at the significant benefits AIF offers:
Key Benefits Under the National Agri Infra Fund (AIF)
1) Bank Term Loan Benefits
The AIF is a credit-linked subsidy scheme, meaning it’s directly connected to obtaining bank finance. It aims to make loans more accessible and affordable for agri-infra businesses:
- 3% Interest Subsidy: You’ll receive a 3% interest subsidy on term loans of up to ₹2 crore, valid for up to 7 years. For example, if your bank charges a 9% interest rate, this subsidy reduces your effective interest rate to 6%, substantially lowering your loan costs.
- Automated Benefit: Once approved, the interest subsidy automatically syncs with your loan account, ensuring quarterly interest payments at the reduced rate without additional applications.
2) Timeline of Applicability
You have until March 31, 2026, to secure a term loan under this scheme. The loan, if approved by this date, will be eligible for benefits for a full seven years, meaning loans taken up to 2026 can remain eligible until 2033.
3) Applicability to Larger Loans
While you can take loans exceeding ₹2 crore, the interest subsidy applies only to the initial ₹2 crore. For instance, on a ₹3.5 crore loan, the 3% interest subsidy is granted on the first ₹2 crore portion, making it highly beneficial even for larger-scale projects.
4) Using the AIF Route for Loan Applications
For efficient loan processing, it’s recommended to first obtain AIF project approval and then present your project to the bank. AIF works directly with banks, reducing processing times and ensuring a seamless experience:
- Priority Sector Lending: Approved projects qualify under priority sector lending, enhancing their chances for bank approval.
- 60-Day Loan Processing Mandate: Banks must make loan decisions within 60 days of receiving project details, significantly reducing wait times.
5) Benefits on Pre-Sanctioned Loans
Even if you took a loan after 2020 without initial AIF approval, you can still sync your project with AIF now. This allows you to benefit from the remaining interest subsidy for the loan’s duration by aligning it with AIF.
Additional Benefits Under AIF
1) Collateral Security Relaxation
The scheme provides a government-backed credit guarantee under CGTMSE, reducing the need for collateral. This is highly advantageous for businesses that may lack additional security but still want to access loans.
2) Credit Guarantee Coverage
If a borrower defaults, the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) ensures the bank receives repayment, offering additional security and encouraging banks to lend under the scheme.
3) CGTMSE Fee Refund
The scheme refunds the CGTMSE cover fees, lowering overall loan expenses.
Steps to Maximize Benefits from AIF
- Seek AIF Project Approval: Apply through AIF for project approval to ensure your business qualifies.
- Inform Your Banker: Notify your banker about AIF benefits and request priority sector lending status.
- Sync Your Loan Application with AIF: Upload your loan application through AIF’s provisions to unlock interest subsidy, collateral benefits, and priority processing.
Additional AIF Flexibility: Combine with Other Subsidies
The AIF scheme allows you to combine benefits with other central or state incentives. For instance, you can apply for capital subsidies, stamp duty refunds, or additional state subsidies alongside AIF. This flexibility lets businesses maximize their financial advantage through diverse subsidies.
Project Expansion Potential: Up to 25 Projects
AIF covers up to 25 projects per business, provided they are located at different sites. For instance:
- You could have a rice mill, an oil mill, and a warehouse in distinct locations, each eligible for up to ₹2 crore in term loans.
- With separate project locations, you can unlock up to ₹6 crore in term loans across three projects, thereby increasing the scope of your AIF benefits.
Strategy for Maximizing AIF Coverage
- Consider setting up projects at different locations to capitalize on multiple term loans and their associated subsidies.
- For partnerships or separate units, establish each project as an independent entity to maximize coverage.
Conclusion: Empowering Agri-Business Growth with AIF
The National Agri Infra Fund (AIF) is a transformative opportunity that provides not only interest subsidies and easier credit access but also significant coverage across multiple projects. By following the structured approach of seeking AIF approval, syncing your project with priority lending, and utilizing AIF’s expansive benefits, you can substantially reduce business costs and enhance profitability.
For agri-entrepreneurs, this scheme supports strategic planning and financial growth, aligning with government objectives to boost the agricultural sector.
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