The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has on 6th January 2016 given its approval for the creation of a Credit Guarantee Fund for Micro Units Development Refinance Agency (“MUDRA”) loans and to convert MUDRA Ltd. into MUDRA Small Industries Development Bank of India (“MUDRA SIDBI”) Bank as a wholly owned subsidiary of the Small Industries Development Bank of India (“SIDBI”).
The key features of the MUDRA scheme are detailed below:
- Establishment of Credit Guarantee Fund for MUDRA Units for guaranteeing loans sanctioned under Pradhan Mantri Mudra Yojana with effect from 8th April, 2015 with the objective to reduce the credit risk to Banks/NBFCs/MFIs/other finance intermediaries who are member lending institutions.
- The National Credit Guarantee Trustee Company Ltd., a wholly-owned company of the Government of India, would manage and operate various credit guarantee funds.
- The guarantee would be provided on portfolio basis to a maximum extent of 50% of 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 Government of India.
The Fund is expected to guarantee more than Rs 1,00,00,000/- (Rupees One crore Only) worth of loans to micro and small units in the first instance.
