What changed
RBI clarified that subsidised loans under NSTFDC and NHFDC schemes can be priced below the Base Rate if backed by refinance from these corporations. Earlier Base Rate guidelines required all loans to be at or above Base Rate; this circular creates a specific carve-out for these targeted social sector schemes.
What it means for you
Banks can now offer concessional interest rates to Scheduled Tribes and disabled beneficiaries under NSTFDC/NHFDC schemes without breaching Base Rate norms. However, the subsidy is limited to the refinance portion; any unrefinanced part must still meet the Base Rate floor. This supports financial inclusion without undermining the Base Rate framework.
What you must do
- Ensure loans under NSTFDC/NHFDC schemes are split into refinanced and unrefinanced portions for pricing.
- Charge interest at prescribed scheme rates only on the refinanced portion; the rest must be at or above Base Rate.
- Maintain clear documentation to demonstrate compliance with the refinance-linked exemption.
- Update internal lending policies and training materials to reflect this exemption for eligible borrowers.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Borrowers from Scheduled Tribes under NSTFDC schemes, Disabled beneficiaries under NHFDC schemes
Can we lend below Base Rate for all NSTFDC loans?
Only to the extent refinance is available from NSTFDC. The unrefinanced portion must be priced at or above Base Rate.
Does this circular apply to NHFDC schemes as well?
Yes, the same principle applies: subsidised rates are allowed only on the refinanced part; the rest must meet Base Rate.
Will this be considered a violation of Base Rate guidelines?
No, RBI explicitly states that such lending below Base Rate, when backed by refinance, is not a violation.