India - Bihar Agricultural Credit Project : Credit 0440 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 440 IN Project Agreement (Bihar Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND BIHAR STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED DATED NOVEMBER 29, 1973 CONFORMED COPY CREDIT NUMBER 440 IN Project Agreement (Bihar Agricultural Credit Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION AND BIHAR STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED DATED NOVEMBER 29, 1973 PROJECT AGREEMENT AGREEMENT, dated November 29, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association), AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC) and BIHAR STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED (hereinafter called LDB). WHEREAS by a development credit agreement of even date herewith between India, acting by its President, (hereinafter called the Borrower) and the Association (hereinafter called the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to thirty-two million dollars ($32,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition inter alia that ARC and LDB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by an agreement of even date herewith between the Association and the State of Bihar acting by its Governor, the said State has agreed to undertake certain obligations in respect of the carrying out of the Project; WHEREAS by a subsidiary loan agreement of even date herewith between the Borrower and ARC, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to ARC on the terms and conditions therein set forth; and WHEREAS ARC and LDB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the term "Rs" means rupees in the currency of the Borrower. 4 ARTICLE II Execution of the Project Section 2.01. ARC and LDB shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and agricultural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. (a) ARC shall enter into a Subsidiary Loan Agreement with the Borrower on terms and conditions (including inter alia those set forth in Schedule 3 to the Development Credit Agreement) satisfactory to the Association. ARC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, ARC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any prcvision thereof. (b) ARC shall, as soon as may be after the date of this Agreement, invite to participate in the Project the banks listed in the Second Schedule to the Reserve Bank of India Act, 1934, on terms and conditions (including inter alia those set forth in Schedule I to this Agreement) satisfactory to the Association. (c) Subject to the provisions of paragraph (e) of this Section, ARC shall enter into agreements with LDB and each bank responding to ARC's invitation under paragraph (b) of this Section on terms and conditions (including inter alia those set forth in Schedule I to this Agreement) satisfactory to the Association. (d) ARC shall: (i) require Participating Banks to maintain separate accounts for Project lending and (ii) ensure that the annual audited accounts of such Banks are furnished to the Association within four months of the end of their fiscal year together with a statement of Project lending for such Banks certified by ARC. (e) ARC shall take due measures to ensure that any bank referred to in paragraph (b) of this Section lends for minor irrigation investments only where: (i) such bank is capable of effective agricultural loan operations; and (ii) such lending conforms to the criteria set forth in Schedules 1 and 2 hereto. 5 Section 2.03. (a) The relending terms and conditions and the procedures for carrying out the Project shall be as set forth in Schedules I and 2 hereto, as the same may be amended from time to time by agreement between the Association, the Borrower, ARC and LDB. (b) ARC shall take all necessary measures to ensure that LDB and the Participating Banks in their operations adhere to the lending terms and conditions and the appraisal criteria and procedures relating to minor irrigation set forth in Schedules 1 and 2 hereto. Section 2.04. ARC shall, after consultation with and agreement by the Association, withhold refinancing under the Project from any branch of LDB which fails to achieve a recovery rate of 75% of all demand (principal and interest on outstanding loans) falling due during the fiscal year ending June 30 of each year. Section 2.05. Except as the Association may otherwise agree, ARC shall ensure that all goods and services financed out of the proceeds of the Credit set forth in Schedule 1 to the Development Credit Agreement are used exclusively for the Project. Section 2.06. ARC and LDB: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to them by the Borrower and by ARC, respectively, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to inspect the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to them and the goods and services financed out of such proceeds. Section 2.07. ARC and LDB shall at all times charge interest on all of their loans at rates sufficient to enable ARC and LDB, respectively, to (a) cover all operating expenditures and charges including taxes (if any) and interest payments on borrowings, and (b) maintain adequate provisions for bad debts and maintain adequate general reserves in accordance with sound commercial practice. Section 2.08. ARC shall monitor and evaluate on a continuing basis the financial and economic benefits resulting from the Project. Section 2.09. ARC in consultation with the Association shall continue to assist in the maintenance by LDB and its branches of sound business and financial practices. 6 Section 2.10. LDB shall adhere to the lending terms and conditions and the appraisal criteria and procedures relating to minor irrigation set forth in Schedules 1 and 2 hereto. Section 2.11. ARC shall take due measures to ensure that all Participating Banks lend for all minor irrigation investments in the Project Area only where such lending conforms to the criteria and terms and conditions set forth in Schedules 1 and 2 hereto except for schemes submitted under the aegis of the Small Farmers and Marginal Farmers Development Agencies in Bihar. ARTICLE III Management and Operations of ARC and LDB Section 3.01. ARC and LDB shall: (a) at all times manage their affairs, maintain their financial position, plan their future expansion and carry on their operations, all in accordance with sound business and financial practices and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate number; and (b) take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of their business or in the carrying out of the Project. Section 3.02. Except as the Association shall otherwise agree, LDB shall apply the same criteria to all similar types of lending in Bihar that they apply to Project lending and, with respect to such similar types of lending, shall not offer more favorable terms than are offered under Project lending except for schemes under the aegis of the Small Farmers and Marginal Farmers Development Agencies in Bihar. ARTICLE IV Financial Covenants Section 4.01. ARC and LDB shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices their operations and financial condition. Section 4.02. ARC and LDB shall: (i) establish and maintain separate accounts in respect of all funds disbursed and received on account of the Project; (ii) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent I 7 auditors acceptable to the Association; (iii) furnish to the Association as soon as available, and, except as the Association shall otherwise agree, not later than four months after the end of each such year, (A) certified copies of said separate accounts and their financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iv) furnish to the Association such other information concerning their accounts and financial statement and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association, ARC and LDB shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association, ARC and LDB shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of ARC and LDB and other matters relating to the purpose of the Credit. Section 5.02. The Association, ARC and LDB shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and ARC of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. ARC and LDB, respectively, shall enable the Association's representatives to examine all their records and documents relevant to the Project. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association, ARC and LDB thereunder shall terminate on the earlier of the following two dates: I 8 (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date when all principal amounts withdrawn by ARC under the Subsidiary Loan Agreement and interest thereon shall have been repaid by ARC to the Borrower. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify ARC and LDB of this event, and, upon the giving of such notice this Agreement and all obligations of the parties thereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any partial cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. - 9 For ARC: Managing Director Agricultural Refinance Corporation Shri Niketan F Block Shive Sagar Estate Dr. Annie Besant Road Worli, Bombay, 18 W.B. India Cable address: AGROFINANS Bombay For LDB: Bihar State Cooperative Land Development Bank, Limited Bank Road Patna 1, India Cable address- Land Bank Patna, India Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of (i) ARC may be taken or executed by its Managing Director or such other person or persons as ARC shall designate in writing; and (ii) LDB may be taken or executed by its Secretary or such other person or persons as LDB shall designate in writing. Section 7.03. ARC and LDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of ARC and LDB, take any action or execute any documents required or permitted to be taken or executed by ARC and LDB respectively pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 10 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ 1.P.M. Cargill Regional Vice President Asia AGRICULTURAL REFINANCE CORPORATION By /s / T. N. Kaul Authorized Representative BIHAR STATE COOPERATIVE LAND DEVELOPMENT BANK, LIMITED By /s / T. N. K:ul Authorized Representative 11 SCHEDULE 1 Principal Lending Terms and Conditions The following lending terms and conditions shall be used in implementing the Project and shall not be altered without the prior agreement of the Association: 1. Lending terms from ARC to LDB and Participating Banks (a) Interest rate to be not less than 7% per annum; (b) Repayments to be in installments set to coincide, more or less with the maturity period of special debentures purchased by ARC or as the case may be, with expected collections of Agricultural Loans refinanced. (c) Refinancing to be by way of purchase of debentures or by loans at the rate of 90% of individual loans. 2. LDB and Participating Banks to Ultimate Borrowers (a) Interest rate to be not less than 9-1/2% per annum; (b) A once and for all evaluation fee of 1/2% of the cost of project investments may be charged; (c) Farmers' contributions (including obligatory purchase of LDB shares, own labor, and other contributions in cash or kind): (i) for normal lending to be a minimum of 10% of the investment costs in the case of pumpsets and 15% for wells and well improvements; (ii) for lending to small farmers* to be a minimum of 10% of the investment costs in the case of shallow wells, dugwells and pumpsets, and 15%** in the case of tubewells; * "Small Farmers" shall have the meaning assigned to it from time to time by the Association and ARC as the same may be incorporated in any agreement between ARC and LDB or a Participating Bank concluded pursuant to Section 2.02(c) of this Agreement. ** 10% for two or more farmers in a group loan. 12 (d) Repayment periods to be based on the ultimate borrower's repayment capacity, but not to exceed: (i) for normal lending: (A) 7 years on loans for pumpsets, whether financed as separate loans or included in tubewell loans; and (B) 9 years on loans for tubewells; (ii) for lending to small farmers as defined: (A) 7 years on loans for pumpsets, whether financed as separate loans or included in tubewell loans; and (B) 15 years for all other minor irrigation loans. (e) Technical standards, in particular spacing criteria, to be as laid down by the Minor Irrigation Department and subject to the provisions of Schedule 2 to this Agreement; (f) Investments to be evaluated in terms of incremental returns resulting from the additional investments in accordance with evaluation methods developed by ARC; (g) Security to be in accordance with arrangements between LDB and Participating Banks on the one hand and ARC on the other; valuation of land for security on Project loans to be based on the estimated value of the land after development resulting from the loan; and (h) If his own cultivated area is significantly smaller than that which can be adequately irrigated by the tubewell concerned, the borrower shall, as a condition of the loan, be required to sell water surplus to his needs, or to hire out his pumpset or to participate with other farmers in the joint investment and operation of the tubewell. 13 SCHEDULE 2 Spacing of Wells In order to avoid the danger of excessive interference of tubewells, their spacing shall be determined for any area by the following formula: C S = 1000 RxAx 100 rxlOO where S = distance between wells in meters R = irrigation requirement for the average cropping in the area in mm A = size of the area to be irrigated in ha C = cropping intensity r = estimated annual recharge in mm