The National Bank for Agriculture and Rural Development (Nabard) introduced a dedicated debt and credit guarantee programme in a bid to ensure uninterrupted flow of credit in rural areas affected by the COVID-19 pandemic.
The product- Structured Finance and Partial Guarantee Programme to NBFC-MFIs -entails providing partial guarantee on pooled loans extended to small and mid-sized micro finance institutions (MFIs), a release said.
Earlier this month, Nabard inked an agreement with Vivriti Capital and Ujjivan Small Finance Bank in a bid to launch the initiative, which will be enhancing the access to sustainable finance for microenterprises and low-income households.
“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,” Nabard Chairman G R Chintala said.
It will help in facilitating Rs 2,500 crore funding in the initial phase and is likely to be leveled up. The programme is expected to include more than 1 million households across 28 states and 650 districts, the release said.
The pooled loan issuance (PLI) structure offers the lending bank an adequate amount of comfort via Nabard’s partial credit protection and also brings down the cost of capital as the rating of the loans gets notched up and helps lenders meet priority sector goals.
This structure will jointly pool the risk of multiple borrowers and add an extra layer of partial first loss credit enhancement from a highly rated guarantor.
For the first transaction under the programme, Nabard and Vivriti have teamed-up with Ujjivan Small Finance Bank, said the release.
Since the outbreak of the pandemic, Nabard has launched a special liquidity lines and has disbursed around ₹2,000 crore to MFIs and non banking financial companies (NBFCs).