The National Bank for Agriculture and Rural Development (NABARD) on July 20, 2026, issued a circular on Short-Term Refinance to Small Finance Banks.
The following has been stated:
• It has prescribed the General Terms and Conditions for Short-Term (ST) Refinance to Small Finance Banks (SFBs) under Sections 21(1) and 21(4) of the NABARD Act, 1981. The refinance facility is intended to supplement SFBs’ resources for providing short-term credit for agriculture and allied activities, marketing of agricultural produce and inputs, rural development, artisans, handicrafts, village/cottage industries, bona fide trade and other eligible activities. To be eligible, an SFB shall maintain a minimum CRAR of 15%, net NPAs not exceeding 5% of loans and advances, and be in net profit. Eligibility is assessed on the basis of audited financial statements, with additional requirements for applications/drawals made after July 1.
• The refinance is available against eligible short-term loans with a tenure not exceeding 12 months, which shall be outstanding, non-overdue and unencumbered at the time of application. NABARD may provide refinance of up to 80% of eligible short-term loans outstanding, subject to the prescribed conditions and risk rating.
• The refinance may be provided at fixed or floating interest rates, with rates determined by NABARD from time to time. Floating-rate refinance is presently linked to the 3-month Treasury Bill rate plus applicable spread, with the rate reset on the 91st day of disbursement. SFBs defaulting on repayment of principal, interest or other dues become ineligible for further refinance until the default is cleared, and a 2% p.a. penal charge applies during the period of default. The refinance is generally repayable within 12 months. Prepayment is permitted after a 30-day lock-in for fixed-rate loans and a 90-day lock-in for floating-rate loans, subject to a minimum three-day notice. Interest is payable at quarterly rests.
• SFBs are also required to maintain adequate Non-Overdue Cover (NODC) against the refinance. Monthly NODC statements, duly verified by a practising Chartered Accountant, shall be submitted to NABARD by the 20th of the succeeding month. Any NODC deficit shall be regularised within one month, failing which 1% p.a. penal charges are applicable on the deficit. Excess refinance arising from incorrect reporting may be recalled within three days along with penal charges.
• NABARD retains the right to monitor compliance, inspect the books and records of SFBs and conduct special audits. The document also provides prescribed formats for the refinance application, Board resolution, Demand Promissory Note, NODC statement and loan prepayment application.
[Notification no. - 184/DOR-49/2026]
