NABARD's Special Credit Guarantee Programme to Benefit Millions of Households; Know How?

To ensure uninterrupted flow of credit in rural regions affected by Coronavirus pandemic, the National Bank for Agriculture & Rural Development also known as NABARD has launched a dedicated debt & credit guarantee programme.  

According to government release, the product- Structured Finance & Partial Guarantee Programme to NBFC-MFIs involves providing partial guarantee on pooled loans extended to small & mid-sized micro finance institutions (MFIs). ‘

Few days back, NABARD had signed an agreement with Ujjivan Small Finance Bank and Vivriti Capital to launch the initiative that will enhance the access to sustainable finance for microenterprises as well as low-income households.

Nabard Chairman G R Chintala said that “The partially guaranteed loan facility would catalyse much-needed financing to millions of households, agricultural & business markets to sustain in the post Coronavirus environment”.

The release further said it will help in facilitating Rs 2,500 crore funding in the early phase & is likely to be leveled up. The programme will include over 1 million households across 28 states & 650 districts.

The pooled loan issuance (PLI) structure provides the lending bank an adequate amount of comfort through NABARD’s partial credit protection and also reduces the cost of capital as the rating of the loans gets notched up & helps lenders meet priority sector goals.

This structure will mutually pool the risk of numerous borrowers and add an extra layer of partial first loss credit enhancement from a highly rated guarantor.

The release said, for the first transaction under the programme, Vivriti and NABARD have teamed-up with Ujjivan Small Finance Bank.

It is important to mention that since the outbreak of Covid-19, NABARD has launched a special liquidity lines and has given around Rs. 2,000 crore to the MFIs and NBFCs.