NEW INITIATIVES


1. Credit Guarantee Fund : -

The Hon’ble Finance Minister announced in his Budget Speech on March 2012 to set up Credit Guarantee Funds for Education Loans, Skill Development and expanding the scope of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to operate all credit guarantee schemes.

2. A Cabinet Note on the issue with following features has been approved:

• The Cabinet Note proposes a corpus contribution of Rs. 3500 crore for a period of five years beginning from FY2014@Rs.500 crore in the initial year, which will be stepped up by Rs.100 crore each year for guaranteeing education loans. Provisions of this fund will be made by the M/o Human Resources & Development (HRD) from its budget resources, who happen to be settler for the fund in this regard.

• Further, for guaranteeing skill development loans, total corpus of Rs.1000 crore with contribution of Rs. 500 crore each in FY2014 & FY2015. Provisions for these funds will be made by the D/o Financial Services as settler of the fund from its budget resources.

2. Credit Guarantee Fund Scheme for Education Loans (CGSEL) : –

To administer the Credit Guarantee Fund Scheme for Educational Loans, it is proposed to establish a Credit Guarantee Fund. The scheme shall be called the Credit Guarantee Fund Scheme for Education Loans (CGSEL). The Scheme shall be confined to guaranteeing Educational Loans sanctioned by Member Banks of Indian Banks Association (IBA) or other Banks / Financial Institutions as may be directed by Government of India. Government of India, through Ministry of Human Resource Development, as Settlor shall establish a Fund for guaranteeing loans sanctioned under the Education Loan Scheme. Corpus contribution shall be made upfront by the Settlor to the Fund each year. Deficit, if any, in the overall operations of the scheme shall be made good by the Government of India through budgetary grant to the Fund. Any education loan which has been sanctioned by the lending institution with interest rate more than 2% over the base rate of the lending institution will not qualify for guarantee cover. A nominal one time processing fee not exceeding 0.25% and a guarantee fee not exceeding 1% p.a. of sanctioned loan at specified rates by the Management Committee of the Fund from time to time shall be paid by the institution availing the guarantee. In case of default and invocation of claim, the Fund shall settle the claims after due diligence and 75% of the guaranteed amount shall be payable as first installment and the balance, if any, shall be paid after conclusion of recovery proceedings and ascertaining the net / final loss incurred by the lending institution. The proposal targets coverage of guarantees for approx. Rs. 75000 crore for education loans over a period of five years with Rs.10000 crore in the first year of operations and 20% growth rate in subsequent years.

3. CREDIT GUARANTEE FUND FOR SKILL DEVELOPMENT : -

The scheme shall be called the Credit Guarantee Fund Scheme for Skill Development (CGSSD). The Scheme shall be confined to guaranteeing Skill Development Loans sanctioned by Member Banks of Indian Banks Association (IBA) or other Banks / Financial Institutions as may be directed by Government of India. Government of India, through Department of Financial Services, Ministry of Finance, as Settlor shall establish a Fund for guaranteeing loans sanctioned under the Scheme. Any skill development loan which has been sanctioned by the lending institution with interest rate more than 2% over the base rate of the lending institution will not qualify for guarantee cover. A nominal one time processing fee and not exceeding 0.25% and guarantee fee at a specified rates as may be decided by the Management Committee of the Fund from time to time, not exceeding one per cent per annum of sanctioned loan shall be paid by the institution availing the guarantee. In case of default and invocation of claim, the Fund shall settle the claims after due diligence and 75% of the guaranteed amount shall be payable as first installment and the balance, if any, shall be paid after conclusion of recovery proceedings and ascertaining the net / final loss incurred by the lending institution. The extent of guarantee cover shall be 75%. For skill development loans, where there is no detailed data readily available, it is estimated to cover approx. Rs.2500 crore in the first year.