Base Rate exemption for NSTFDC/NHFDC subsidised loans
Current · Source: Reserve Bank of India · RBI/2011-12/170 · issued 09 Sep 2011 · ~2 min read
Quick answerRBI allows banks to lend below Base Rate for NSTFDC and NHFDC schemes, but only to the extent refinance is available. The portion not covered by refinance must be priced at or above Base Rate. This is not a violation of Base Rate guidelines.
The rule, in the simplest words
Banks can give loans at lower interest than their Base Rate (the minimum rate they usually charge) for NSTFDC (a government company helping Scheduled Tribes) and NHFDC (a government company helping disabled people) schemes, but only if the loan is backed by refinance (money given back to the bank by these companies).
If a loan is not fully covered by refinance, the part that is not covered must be charged at or above the Base Rate.
This special rule does not break the normal Base Rate guidelines, so banks can offer cheaper loans to help poor and disabled people without getting in trouble.
How it plays out — a real example
A credit & lending officer in Indore processes a loan for a Scheduled Tribe borrower under the NSTFDC scheme. She splits the loan into two parts: the portion refinanced by NSTFDC gets the low 6% interest rate, while the remaining part is charged at the bank's Base Rate of 10%. She documents both portions clearly to show compliance with RBI rules.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/170
DBOD.Dir.BC.34 /13.03.00/2011-12
September 9, 2011
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir / Madam
Guidelines on Base Rate
Please refer to our circular No. DBOD.Dir.BC.88/13.07.001/2009-10 dated April 9, 2010 and our letter DBOD.Dir.No. 21957/13.07.001/ 2009- 10 dated June 24, 2010 addressed to Indian Banks’ Association (IBA) on the subject.
2. The National Scheduled Tribes Finance and Development Corporation (NSTFDC), a wholly owned Government of India Section 25 Company under the Ministry of Tribal Affairs, extends financial assistance at concessional rates of interest for viable income generating activities to eligible beneficiaries belonging to Scheduled Tribes. The guidelines for implementation of the Micro Credit Scheme of NSTFDC were issued by IBA vide their circulars SB/Govt/113 dated November 22, 2007 and SB/CIR/Govt/NSTFDC/43 dated April 6, 2009. Under the scheme, banks may extend subsidised loans to eligible beneficiaries/SHGs for undertaking Self Employment Ventures/activities at interest rates not exceeding six per cent/eight per cent where refinance at three per cent/five per cent from NSTFDC is available. Similarly, banks may extend subsidised loans to eligible beneficiaries under the various schemes of National Handicapped Finance and Development Corporation (NHFDC) at interest rates prescribed therein where refinance from NHFDC is available. In this context, we advise as under:
Banks may charge interest at the rates prescribed under the schemes of NSTFDC /NHFDC to the extent refinance is available. Such lending, even if it is below the Base Rate, would not be considered as a violation of our Base Rate Guidelines. Interest rate charged on the part not covered under refinance should not be below Base Rate.
Yours faithfully
(P. R. Ravi Mohan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/170 · issued 09 Sep 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Scheduled Commercial Banks (excluding RRBs), Borrowers from Scheduled Tribes under NSTFDC schemes, Disabled beneficiaries under NHFDC schemes), your first concrete step on “Base Rate exemption for NSTFDC/NHFDC subsidised loans” is: “Ensure loans under NSTFDC/NHFDC schemes are split into refinanced and unrefinanced portions for pricing.” (RBI issued this 09 Sep 2011).
Circular: RBI/2011-12/170 -- Base Rate exemption for NSTFDC/NHFDC subsidised loans
Issued: 09 Sep 2011
Action required: Ensure loans under NSTFDC/NHFDC schemes are split into refinanced and unrefinanced portions for pricing.
Action required: Charge interest at prescribed scheme rates only on the refinanced portion; the rest must be at or above Base Rate.
Action required: Maintain clear documentation to demonstrate compliance with the refinance-linked exemption.
Action required: Update internal lending policies and training materials to reflect this exemption for eligible borrowers.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6702&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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