1. PURPOSE OF LOAN
Purpose of the loan is to provide financial assistance to weaker sections of minorities for starting or augmenting income generating activities except to the extent when a loan is sanctioned for other purposes. The illustrative nature of income generating activities is given below:

i) Small business/Trade
ii) Tiny/cottage industry or service activity
iii) Artisan activities
iv) Agricultural and allied activities
v) Transport sector activities

2. QUANTUM OF LOAN AND RATE OF INTEREST
Under the scheme of micro-financing, Short Term (ST) Loans upto Rs.6,000/- per beneficiary and Medium Term (MT) Loans upto Rs.10,000/- per beneficiary will be available at an interest rate of 10% on convenient repayment terms. Loans could be given repeatedly, if necessary, subject to repayment of the earlier loans.

3. ELIGIBILITY

a.	The beneficiary must belong to minority community as notified by Central Government under the National Minorities Commission Act, 1992. At present, these communities are Muslims, Sikhs, Christians, Buddhists and Parsis.
b.	The family income of the beneficiary should be below double the poverty line i.e. Rs.32,000/- p.a. for rural areas and Rs.42,000/- p.a. for urban areas.
c.	The borrowers already covered under any other scheme of financing sponsored by Central or State Government or financing institutions and having outstanding loans against their names shall not be eligible.
d.	The borrower should preferably be regular member of a Thrift and Credit Group (Self Help Group). Under micro financing scheme, groups of individuals belonging to the minorities will include such groups in which predominantly (75% and above) members belong to minority community. In very exceptional cases this may include those groups also where upto 60% members belong to minority community provided other members belong to weaker sections including Scheduled Castes/Scheduled Tribes, Other Backward Classes and Disabled.
e.	Preference will be given to women beneficiaries.

4. IMPLEMENTING AGENCY
NMDFC will provide credit through NGOs (Non Government Organisation) in Rural and Urban areas. The NGOs will further finance the beneficiaries either directly or through Self Help Group (SHGs). The NGOs would be advised to select their beneficiaries for financing in villages/areas different from the Rashtriya Mahila Kosh or any other agency to avoid any duplication.

a.	It should have broad based objectives, serving the social and economic needs of the weaker sections of the minority community. Preference will be given to organisations working for welfare of the minorities.
b.	It should have the necessary flexibility; professional competence and basic financial management capability and organisational skills to implement the lending programme. It must have out reach services in the operational areas.
c.	Its office bearers should not be elected members of any political party.
d.	It should have a proper system of maintaining accounts. Accounts should have been audited. There should not have been any serious irregularities observed in the audit, and its accounts should be published, the applicant NGO should have been registered for atleast three years and it should have good reputation of work in the area.
e.	The NGO should be running on sound lines and have experience of thrift and credit administration of at least 6 months and its recovery performance during the last 6 months should be approximately 90%. The NGOs with less than 6 months experience would however not be considered under the Micro Financing Scheme.

5. FINANCING PATTERN
The funds provided to NGOs will be utilised by observing in general, the following financing pattern :

a.	Funds from NMDFC : 90%
b.	10% contribution by NGO from its own resources or from beneficiaries by way of compulsory thrift.

6. INTEREST SPREAD
The lending rate of NMDFC for implementing agencies i.e. NGOs is 1% per annum. The NGOs will further provide the funds to SHGs at interest rate of 5% per annum.

7. OTHER INCENTIVES FOR IMPLEMENTING AGENCIES

a.	In addition to interest spread of 4%, NGOs will be paid 1% of the loan amount as grant for any activity undertaken by it for skill up-gradation of borrowers or any other training relevant for Credit Management Programme. This training grant will be provided on yearly basis at the end of the relevant financial year after observing the performance of the NGO.
b.	Each selected NGO will be eligible to obtain an interest free loan not exceeding Rs.2.15 lakhs for promotion of Self Help Groups. The repayment of loan will be adjusted by way of grant, details of which are given in the scheme of Interest Free Loan. The details of the scheme of Interest Free Loan to NGOs are also given in the booklet.

8. UTILISATION OF LOAN AND REFUND OF UNUTILISED LOAN

a.	The NGO to which funds have been sanctioned can make the drawl of funds as per requirement within the credit limit sanctioned, which generally will be for one year.
b.	The first drawl will be made not later than one month from the date of sanction unless the limit is extended by the NMDFC. If the lending operations are not so commenced, the NMDFC will be at liberty to cancel the sanction or vary any of the terms and conditions.
c.	The funds made available to any NGO are to be utilised within a period of one month from the date of release of funds. The NGO will be required to send monthly report on utilisation of funds in the prescribed format. The funds remaining unutilised due to any reason, will be required to be refunded within a fortnight on expiry of utilisation period indicated in the sanction letter. Any delay in refund of such amounts will carry penal interest at the rate of 8% per annum.

9. REPAYMENTS
Loans drawn from NMDFC will be required to be repaid within a period of 36 months in quarterly instalments. The instalment shall be repayable to NMDFC on 30th June, 30th September, 31st December and 31st March every year or for such other dates as are agreed to by NMDFC. Six days grace period will be admissible for payment of any instalment to NMDFC. Compound interest will be levied on delayed payments. In the event of default persisting beyond one month, penal interest will be charged at the rate of 8%.

10. SECURITY
The loan sanctioned to NGOs may be secured by such securities/guarantees as may be prescribed by NMDFC in the sanction letter.

11. INSURANCE COVER
Adequate insurance cover may be obtained in respect of assets acquired by beneficiaries out of MT loans advanced by NMDFC.

12. BOOKS OF ACCOUNTS/INSPECTION
The NGO shall maintain separate accounts in respect of the funds provided by NMDFC. Annual audited accounts will be submitted within four months after close of the accounting year of the NGO with the statement of lending and recoveries during the year. Any other information required will also have to be submitted as and when requested.

13. PROCEDURE FOR OBTAINING LOAN
The NGOs desirous of implementing NMDFC's micro financing scheme will have to submit proposal for obtaining funds indicating the purposes, the estimated number of borrowers and the aggregate amount required for each purpose. Along-with the application, the NGO will submit annual report for last two years and balance sheet and audited accounts for last three years. Based on the information given and if required by inspection of NGO. NMDFC will prepare a report on past antecedents, performance, competence and capacity of the concerned NGO. The report will include the recommendations regarding suitability of the NGO for implementation of NMDFC's schemes of micro-financing and its capacity to handle number of beneficiaries viz-a-viz the amount of funds. The application along-with further information, if any, submitted by NGO and pre-sanction study report are submitted for consideration to the competent authority for sanction. The sanction letter will be issued to the NGO giving details of terms and conditions to the financial assistance including utilization period, recoveries, penal interest etc. Before any drawls are made/allowed, the NGO will have to execute the prescribed documents including a guarantee letter in the prescribed format.

14. Drawls up to 50% of sanctioned amount will be allowed initially after completing the formalities mentioned in the sanction letter. Further drawls will be allowed only after a study has been done by NMDFC, of the quality of lendings and a satisfactory performance in proper utilization etc. of the amount disbursed.

15. The NGO will submit post dated cheques for the repayment of quarterly dues as indicated in sanction letter. These post dated cheques will be kept by NMDFC only as a security and the NGO will keep on paying quarterly demands on NMDFC by way of Demand Drafts. On receipt of the Demand Draft from the NGO, NMDFC will return the post dated cheque of the respective quarter along with an acknowledgement of the demand Draft so received. Thus, the post dated cheques that have been obtained from the NGO will not be enchased by NMDFC in the normal course i.e. when NGO promptly pays the demand in full. However, when the NGO commits a default and delays the repayment. NMDFC will exercise its option of enchasing post dated cheques and take suitable action against he defaulting NGO. The waiting period, before the cheque is sent for encashment, will be the last date of the quarter that is following the quarter for which the demand had been raised. Thus for example, if the repayment of the demand of quarter ending 30.09.2003 is not received by 31.12.2003, the post dated cheque of that quarter (30.09.2003) will be sent for encashment.