NABARD's Rural Infrastructure Development Fund (RIDF) was established in 1995-96 to finance rural infrastructure projects through State Governments and State-owned corporations. Banks with shortfall in agricultural lending contribute to RIDF at below-market rates. RIDF XXIX (2023-24) has corpus of ₹50,000 crore. Funded projects include rural roads, bridges, irrigation, rural electrification, cold storage, and market infrastructure. Over 28 tranches have mobilized over ₹6 lakh crore, creating significant rural employment and improving farm connectivity across India.

RIDF addresses the critical rural infrastructure gap by leveraging banks' unmet agricultural lending targets. When commercial banks fail to achieve 18% agricultural credit target, the shortfall amount is deposited with NABARD at concessional rates (currently 3.5% for RIDF XXIX). This creates a win-win: banks fulfill regulatory requirements while NABARD gets low-cost funds for rural development. The mechanism ensures continuous funding for State-led infrastructure projects that private sector finds unviable. RIDF's impact extends beyond physical infrastructure - it generates employment in rural areas, improves agricultural productivity through better connectivity and irrigation, and enhances access to markets for farmers. The fund has evolved from focusing primarily on rural roads and bridges to covering comprehensive rural infrastructure including digital connectivity, renewable energy, and cold chain facilities. Recent tranches emphasize climate resilience and sustainable development. RIDF's success lies in its self-sustaining model where regulatory compliance drives rural development funding, making it independent of budget allocations.