The Union Cabinet has given its approval for the creation of a Credit Guarantee Fund for Micro Units Development Refinance Agency (MUDRA) loans.
Approval has also been given for converting MUDRA Ltd into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI.
The fund is expected to guarantee more than Rs 1,00,000 crore worth of loans to micro and small units at the first instance.
The salient features of the scheme are 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 of reducing the credit risk to banks/NBFCs/MFIs/other financial intermediaries, who are Member Lending Institutions (MLIs).
National Credit Guarantee Trustee Company Ltd. (NCGTC Ltd), a wholly-owned company of the Government of India, constituted under the Companies Act, 1956 (2013) to manage and operate various credit guarantee funds, would be the trustee of the fund.
The guarantee would be provided on a portfolio basis to a maximum extent of 50 per cent of the amount in Default in the portfolio.
The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management; data analysis etc. apart from any other activity entrusted/ advised by the Government of India.