Previous Year Question

The Rural Infrastructure Development Fund (RIDF) was established in 1995-96 under NABARD.

The creation of RIDF was announced in the Union Budget for 1995-96. Its initial purpose was to provide finance to State Governments for completing ongoing rural infrastructure projects that had remained incomplete because of inadequate financial resources.

RIDF began with an initial corpus of ₹2,000 crore. In its initial phase, it focused mainly on rural infrastructure activities such as—

irrigation projects,
flood protection, and
watershed management.

Its coverage was subsequently expanded to include a wide range of activities relating to agriculture, the social sector and rural connectivity.

RIDF primarily provides concessional loans to State Governments and State-owned Corporations for implementing rural infrastructure projects.

An important financing feature of the Fund is that its resources include deposits arising from the shortfall of Scheduled Commercial Banks in meeting Priority Sector Lending requirements. Thus, part of the priority-sector lending shortfall can be channelled towards rural infrastructure development.

The distinction between RBI and NABARD is important here. The RBI is connected with the regulatory framework and priority-sector lending norms, but RIDF is operationalised and administered by NABARD.