Union Cabinet approves creation of a Credit Guarantee Fund for MUDRA loans

Cabinet approves creation of a Credit Guarantee Fund for MUDRA loans – A boost to refinance operations

Ques: Recently the Union Cabinet gave its approval for the creation of a Credit Guarantee Fund for loans under which of the following scheme?

(a) Pradhan Mantri Jan-Dhan Yojana

(b) Pradhan Mantri Mudra Yojana

(c) Pradhan Mantri Suraksha Bima Yojana

(d) Atal Pension Yojana

Ans (b)

 Related facts:

  • On January 6, 2016 the Union Cabinet given its approval for the creation of a Credit Guarantee Fund for MUDRA (Micro Units Development Refinance Agency) loans.
  • Establishment of Credit Guarantee Fund for MUDRA Units (CGFMU) for guaranteeing loans sanctioned under Pradhan Mantri Mudra Yojana with effect from April 8, 2015.
  • With the objective to  reduce  the  credit  risk  to  Banks  /  NBFCs  /  MFIs  /  other  financial  intermediaries,  who  are  Member Lending Institutions (MLIs).
  • The National Credit Guarantee Trustee Company Ltd. (NCGTC Ltd.), a  wholly-owned  company  of  Government  of  India, shall  be  the  Trustee  of  the
  • The  guarantee  would  be  provided  on  portfolio  basis  to  a  maximum  extent of  50%  of  Amount  in  Default  in  the  portfolio.
  • The Fund is expected to guarantee more than Rs 1,00,000 crore worth of loans to micro and small units in the first instance.
  • The cabinet given its approval to convert MUDRA Ltd. into MUDRA Small Industries Development Bank  of  India (SIDBI)  Bank as a wholly owned subsidiary of SIDBI.
  • The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services.
  • MUDRA  Bank and  a Credit  Guarantee  Fund was proposed to be set up with  a refinance corpus of Rs. 20,000  crore and a corpus of Rs.3,000  crore respectively as per the Budget  Speech for 2015-16.

Reference

http://pib.nic.in/newsite/PrintRelease.aspx?relid=134215