- NABARD launches credit guarantee scheme
- NABARD signed a pact with Vivriti Capital and Ujjivan Small Finance Bank
- The Pooled Loan Issuance (PLI) structure provides the lending bank adequate comfort through Nabard’s partial credit protection
On Monday, the National Bank for Agriculture and Rural Development (NABARD) said that it has introduced a new dedicated debt and credit guarantee product which will ensure an unrestricted flow of credit in the rural areas in the country which have been hit by the COVID-19 pandemic.
The product – Structured Finance and Partial Guarantee Programme to Non-Banking Financial Company- Micro Financial Institutions (NBFC-MFIs) – involves providing a partial guarantee on pooled loans extended to small and mid-sized Micro Finance Institutions (MFIs), a release said.
Earlier in August, NABARD has signed a pact with not just Vivriti Capital but also Ujjivan Small Finance Bank to roll out this initiative, which will then enhance the access to sustainable finances for microenterprises and also the low-income households.
Chairman of NABARD, G R Chintala said, “The partially guaranteed loan facility will catalyse much-needed financing to millions of households, agricultural and business markets to sustain in the post COVID-19 environment,”.
The release also said, “It will help facilitate ₹2,500 crore funding in the initial phase and is expected to be scaled up. The programme is expected to cover over 1 million households across 28 states and 650 districts,”.
The PLI or the Pooled Loan Issuance structure will provide the lending bank adequate comfort via the NABARD’s partial credit protection which will reduce the cost of capital as the rating of these loans get higher up and subsequently help the lenders in meeting the priority sector goals.
The structure will pool together the risk of not one but multiple borrowers and then add a layer of partial first loss credit enhancement from a guarantor who has a high rating.
The press release also said that for the initial transaction under this programme, NABARD and Vivriti have partnered with the Ujjivan Small Finance Bank.
Since the global pandemic began, NABARD has rolled out special liquidity lines and has even disbursed close to Rs 2,000 crore to the MFIs and other Non-Banking Financial Companies (NBFCs) all around the country which has been significantly impacted by it.