NEW DELHI: The National Bank for Agriculture and Rural Development (NABARD) has rolled out a dedicated debt and credit guarantee programme for small microfinance NBFCs. The programme is aimed at ensuring a smooth flow of credit in rural areas in the midst of the disruption caused by the pandemic.
The development bank on Monday said that it has signed a pact with Vivriti Capital and Ujjivan Small Finance Bank in order to roll out the initiative. “The program will help facilitate Rs 2,500 crore funding in the initial phase and is expected to be scaled up,” said Nabard, adding it is expected to cover 1 million household.
“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,” G R Chintala, Chairman, NABARD said. The Pooled Loan Issuance (PLI) structure also provides the lending bank adequate comfort through the partial credit protection, reduces the cost of capital as the rating of the loans get notched up and helps lenders meet priority sector goals, the development bank noted.
The new structure is expected to pool together the risk of multiple borrowers and add a layer of partial first loss credit enhancement from a highly rated guarantor. “With NABARD as a guarantor and a convincing product construct in place, the program has helped attract a large number of mainstream banks and small finance banks to participate,” Nabard said in a release.
Aims to cover more than one million households
The program will help facilitate I2,500 crore funding in the initial phase and is expected to be scaled up, said Nabard, adding it is expected to cover over one million households.