What is Credit Guarantee Fund (CGF) ?
UNION CABINET APPROVES CREATION OF A CREDIT GUARANTEE FUND FOR MUDRA LOANS
- The Union Cabinet has approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans.
- The CGF is expected to guarantee more than 1,00,000 crore rupees worth of loans to micro and small units in the first instance.
- Features of scheme Credit Guarantee Fund for MUDRA Units (CGFMU) will guarantee loans sanctioned under Pradhan Mantri Mudra Yojana (PMMY) to reduce the credit risk to Banks and other financial intermediaries who are Member Lending Institutions (MLIs).
- National Credit Guarantee Trustee Company NCGTC Ltd will manage and operate various credit guarantee funds and shall be the Trustee of the NCFTC will be a wholly-owned company of Union Government and shall be constituted under the Companies Act, 1956 (2013).
- Under this scheme the guarantee would be provided on portfolio basis to a maximum extent of 50 % of Amount in Default in the MUDRA (SIDBI) Bank Cabinet also gave its nod for converting MUDRA Ltd. into MUDRA Small Industries Development Bank of India (SIDBI) Bank, a wholly owned subsidiary of SIDBI. The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management and also data analysis etc.
- Background In the Union Budget speech for 2015-16, Union Finance Minister Arun Jaitley had proposed to set up MUDRA Bank and CGF with a refinance corpus of 20,000 crore rupees and a corpus of 3,000 crore rupees respectively.
- MUDRA Ltd. was set up as a corporate subsidiary of SIDBI in March 2015 prior to the launch of the Pradhan Mantri MUDRA Yojana (PMMY) in April 2015.