Semfex I/ II/ III

Scheme for Soft Loan Assistance for Margin Money (SLA-MM) Under SEMFEX -II


NABARD has formulated several schemes to extend refinance support to various farm and non-farm activities. Having regard to the imperative need to provide margin money assistance in cases where this cannot be arranged by the prospective entrepreneurs, NABARD has constituted 'Soft Loan Assistance Fund for Margin Money'. The objective of the scheme is to provide financials assistance to the prospective entrepreneurs who have the requisite talents and skill of entrepreneurship, but lack necessary monetary resources of their own for setting up units/implementing projects under NABARD refinance schemes for non-farm sector and innovative, hi-tech projects, export oriented units and agro-processing schemes covered under the farm sector. With due regard to the services rendered by the ex-Servicemen in defending the Motherland sacrificing their prime of youth and with a view to encouraging the ex-Servicemen settling down in civil life to undertake agriculture and allied activities. The scope of the SLA-MM Scheme has been extended to all farm sector activities under SEMFEX-II.

Eligibility criteria

The loan assistance towards margin money will be available to the ex-Servicemen, war-widows, widows of ex-Servicemen and disabled service personnel irrespective of their rank, income and location of the projects in rural areas. They will be eligible to receive assistance under the scheme provided they are registered with the Rajya Sainik Boards(RSBs)/Zila Sainik Boards (ZSBs). Those not registered with ZSB/RSB, will be required to do so before their applications are entertained.

Mode of assistance.

Margin Money assistance will be by way of soft loan to the entrepreneurs/promoters.

Scope of assistance.

The Soft Loan Assistance for Margin Money will cover not only non-farm sector activities (other than SRTO scheme) and innovative, high-tech projects, agro-processing and export oriented projects covered under farm sector activities but also other farm sector activities such as poultry, dairy, fisheries, horticulture, floriculture, wasteland development, mushroom cultivation, mechanised fishing, minor irrigation, etc. under SEMFEX -II.

Amount of assistance.

He quantum of assistance will be determined, among other things, on the basis of the gap between the normal level of promoter's contribution (margin) prescribed under various refinance schemes or as stipulated by RBI for loans under Priority Sector and promoter's own minimum contribution for the project and also the other subsidies/incentives/assistance provided by the Central/State Government(s). The amount of assistance shall be equal to 100% of the shortfall in promoter's contribution, subject to the following conditions.

  1. The margin will be as stipulated by RBI under loans for priority sector and the bank may insist that the borrower should bring in some percentage thereof as his own contribution.
  2. The margin requirement from promoters for farm sector advances is as under %.

    1. Land based activities
      • Small farmers (SF) 5%
      • Medium farmers (MF) 10%
      • Other farmers (OF) 15%
    2. Agro-Processing Units: 25%
  3. The margin money assistance shall not be more than 20% of the project outlay subject to a ceiling of Rs. 5 lakh. However, margin money in excess of the above ceiling may be considered by the Head Office of NABARD in exceptional circumstances, on a case to case basis, where the project is either 100% export oriented, innovative, high-tech or agro-processing. benefiting a large number of small producers

Other terms and conditions

  1. Extent of refinance. Refinance assistance to the financing banks will be provided to the extent of 100% of their advance.
  2. Rate of Interest. The refinance assistance to be provided against the bank loan for margin money will be, for the present, free of interest. However, the financing bank will be allowed to levy a service charge on the amount of margin money loan advanced.
  3. Repayment Period. Margin money loan will be recovered along with the term loan in suitable installments as stipulated under the relevant scheme.

Drawal of refinance

As in the case of NFS schemes covered under the Automotive Refinance Facility (ARF), the banks may sanction and release the soft loan assistance and claim refinance from NABARD, furnishing separately details of the assistance as per the prescribed proforma.

Role of banks

The banks extending the margin money loan are expected, among other things, to make a thorough evaluation of the entrepreneurs with a view to assessing their capability to set up and run the projects successfully. The banks should also continuously monitor the progress of the units assisted at various stages.

Monitoring by Rajya/Zila Saink Boards

A proper mechanism for monitoring the implementation of the Scheme on a quarterly basis may be evolved by the concerned Rajya/Zila Sainik Boards to ensure smooth progress of the Scheme. A copy of such review notes may be furnished to NABARD Regional Offices.



The Scheme is applicable to all viable village industry projects set up in rural areas. The various village industries under the Scheme are grouped in seven heads for the purpose of implementation of the programmes.

Group-I: Mineral Based Industry

1) Cottage Pottery Industry, 2) Lime stone, lime shell and other lime products industry 3) Stone cutting, crushing, carving and engraving for temples and buildings, 4) Utility articles made out of stone, 5) Slate and slate pencil making, 6) Manufacture of plaster of paris, 7) Utensil washing powder, 8) Fuel briquetting, 9) Jewellery out of gold, Silver, Stone, Shell & Synthetic materials, 10) Manufacture of gulal, rangoli, 11) Manufacture of Bangles, 12) Manufacture of paints, pigments, varnishes and distemper, 13) Manufacture of glass toys, 14) Glass decoration-cutting, designing and polishing, 15) Gem cutting.

Group-II: Forest Based Industry

16) Handmade paper, 17) Manufacture of Katha, 18) Manufacture of gums and resins, 19) Manufacture of shellac, 20) Cottage match industry, manufacture of fire works & aggarbattis, 21) Bamboo and cane work, 22) Manufacture of paper cups, plates, bags and other paper containers, 23) Manufacture of exercise book binding, envelope making, register making, including all other stationery items made out of paper, 24) Khus tattis and broom making, 25) Collection, processing and packing of forest products, 26) Photo framing, 27) Manufacture of jute products (under fibre industry).

Group-III: Agro Based and Food Industry:

28) Processing, packing and marketing of cereals, spices, condiments, masala etc. 29) Noodles making, 30) Power atta chakki, 31) Daliya making, 32) Mini rice shelling unit, 33) Palmgur making and other palm products industry, 34) Manufacture of cane gur and khandsari, 35) Indian sweets making, 36) Raswanti - sugarcane juice catering unit, 37) Bee-keeping, 38) Fruits and vegetable processing preservation and canning including pickles, 39) Ghani oil industry, 40) Menthol oil, 41) Fibre other than coir, 42) Collection of forest plants and fruits for medical purposes, 43) Processing of maize and ragi, 44) Pith work, manufacture of pith mats and garlands etc., 45) Cachew processing, 46) Leaf cup making, 47) Milk products making unit, 48) Cattle feed, poultry feed making.

Group-IV: Polymer and Chemical Based Industry:

49) Flaying, curing and tanning of hides and skins and ancillary industries connected with the same and cottage leather industry, 50) Cottage (dipped latex products), 51) Manufacture of rubber goods (dipped latex products) 52) Products out of rexin PVC etc., 53) Horn and bone including ivory products, 54) Candle, camphor and sealing wax making, 55) Manufacture of packing items of plastics, 56) Manufacture of Bindi, 57) Manufacture of Mehandi, 58) Manufacture of essential oils, 59) Manufacture of shampoos, 60) Manufacture of hair oil, 61) Detergents and washing powder making (non-toxic).

Group-V: Engineering and Non Conventional Energy:

62) Carpentry, 63) Blacksmithy, 64) manufacture of household aluminum utensils, 65) manufacture and use of manure and methane (Gobar) Gas from cow dung and other waste products (Such as flesh of dead animals, night soils etc.), 66) Vermiculture and waste disposal, 67) Manufacture of paper pins, clips, safety pins, stoves pins etc., 68) Manufacture of decorative bulbs, bottles, glass etc., 69) umbrella assembling, 70) Solar and wind energy implements, 71) Manufacture of handmade utensils out of brass, 72) Manufacture of handmade utensils out of copper, 73) Manufacture of handmade utensils out of bell metal, 74) Other articles made out of brass, copper and bell metal, 75) Production of radios, 76) production of cassette player whether or not fitted with radio, 77) Production of cassette recorder whether or not fitted with radio, 78) Production of voltage stabilizer, 79) Manufacture of electronic clocks and alarm time pieces, 80) Carved wood and artistic furniture making, 81) Tin smithy, 82) Motor winding, 83) Wire net making, 84) Iron grill making, 85) manufacture of rural transport vehicles such as hand carts, bullock carts, small boats, assembly of bicycles, cycle rickshaw, motorised carts etc., 86) Manufacture of musical instruments.

Group-VI: Textile Industry (Excluding Khadi):

87) Polyvastra which means any cloth woven on handloom in India from yarn handspun in India from a mixture of man made fibre with either cotton, silk or wool or with any two or all of them or from a mixture of man made fibre yarn handspun in India with either cotton, silk or woolen yarn handspun in India or with any two or all of such yarn, 88) Manufacture of lok vastra cloth, 89) Hosiery, 90) Tailoring and preparation of readymade garments, 91) Batik works, 92) Toys and doll making, 93) Thread balls and woolen balling, lacchi making, 94) Embroidery, 95) Manufacture of surgical bandages, 96) Stove wicks, 97) Embroidery of fabrics.

Group-VII: Service Industry:

98) Laundry, 99) Barber, 100) Plumbing, 101) Servicing of electrical wiring and electronic domestic appliances and equipment, 102) Repairs of diesel engines, pump sets, etc., 103) Tyre Vulcanising unit, 104) Agriculture servicing for sprayers, insecticide, pump sets etc., 105) Hiring of sound systems like loud speaker, amplifier, mike etc., 106) Battery charging, 107) Art board painting, 108) Cycle repair shops, 109) Masonry, 110) Band troupe, 111) Motorised local boat (Fibre glass) for Goa only, 112) Motor cycle to fly as taxi (for Goa only), 113) Musical instruments (for Goa only), 114) Dhabas (not servicing liquor), 115) Tea stall, 116) Iodized salt.


  1. Individual loan = Rs. 10 lakhs (Subsidy 30 %)
  2. Maximum loan for co-operative society / institution = Rs. 25 lakhs (Subsidy Rs.4.5 lakhs).
  3. Margin Money requirement (own contribution) only 5 % of the project cost.
  4. Interest rate 13.5 % per annum upto Rs. 25 lakhs.
  5. Repayment period = 8 years including one year moratorium (quarterly 28 equal installments).
  6. Free training facilities available at KVIC Training Centres.
  7. Loan is available through KVIB/KVIC and Scheduled Commercial Banks.


  1. KVIC has placed a lumpsum deposit of margin money (Rs. 132 crores) in advance with the corporate office of each bank or a nodal branch designated by the banks in savings bank account in the name of KVIC.
  2. Banks will appraise projects technically as well as economically and take their own credit decision on the basis of viability of each project.
  3. Banks must ensure investment of "own contribution" to the extent of 5% of the project cost of the ex-servicemen entrepreneur/ individual/ institution/ co-operative society etc.
  4. Since "Margin Money" is to be provided in the form of back-ended subsidy (Grant), it will be credited to the borrower's loan account after 2 years from the date of first disbursement to the ex-servicemen borrower/ institution. 30 per cent of the project cost upto Rs. 10 lakhs will be provided by KVIC as margin money by way of backend subsidy. For projects above Rs. 10 lakhs and upto Rs. 25 lakhs rate of margin money will be 30 per cent of the Rs. 10 lakhs plus 10% of the remaining cost of the project.
  5. Margin money will be one time assistance from KVIC. For any enhancement of credit limit, the KVIC's margin money assistance will not be available.
  6. The eligible ex-servicemen/ widows under the scheme are : (a) Individuals for projects upto Rs.10 lakhs and (b) institutions, co-operative societies, for projects upto Rs. 25 lakhs.


Approximately 60,000 Armed Forces Personnel retire every year in the country at a comparatively young age. In the State of Uttar Pradesh, there are more than 3 lakhs ex-servicemen/widows. It is a matter of great concern for the Ministry of Defence, Govt. of India and the State Govt. to assist the retired defence personnel in their resettlement. The ex-servicemen after spending prime youth period of their life, for the cause of nation, deserve special consideration. They have necessary skill, dedication, capacity to work hard and commitment to achieve results. If proper opportunities are provided to them, they will come out with outstanding performance and prove to be a great asset in economic growth of the country. The Directorate General Resettlement, Ministry of Defence has the overall responsibility for the resettlement/rehabilitation of ex-servicemen, disabled service personnel, widows of ex-servicemen and their dependants. DGR helps them by way of employment, self-employment, training in professional and artisans courses and other welfare measures.

In self-employment, avenue lies in manufacturing activities, small scale service establishments, agriculture, tiny, cottage and village industries. Directorate General Resettlement has launched a few self-employment Schemes for the resettlement of ex-servicemen and widows. Among the self-employment schemes, SEMFEX-I, II & III are the prominent Schemes.


Scheme is operative in collaboration with the Small Industries Development Bank of India (SIDBI). This Scheme provides special incentive by way of Soft Seed Capital Assistance to the extent of 15% of the total project cost at an annual interest of 6%. The financial assistance is available through the State Financial Corporation. Similarly, financial assistance is also available under SIDBI's NEF Scheme.


(From Arms to Farms) Scheme has been promoted with the assistance of National Bank for Agriculture and Rural Development. It provides refinance to Banks for financing for development of agriculture and allied activities, such as minor irrigation, farm mechanisation, mushroom cultivation, dairy, poultry, sheep and goat rearing, fisheries, plantation/ horticulture, Agro-processing units including food processing,