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Nabard launches credit guarantee programme for NBFC-MFIs


The National Bank for Agriculture and Rural Development (Nabard) on Monday said it has introduced a dedicated debt and credit guarantee product to ensure unhindered flow of credit in rural areas hit 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.

Nabard signed a pact with Vivriti Capital and Ujjivan Small Finance Bank earlier this month to roll out the initiative, which will enhance 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 facilitate Rs 2,500 crore funding in the initial phase and is expected to be scaled up. The programme is expected to cover over 1 million households across 28 states and 650 districts, the release said.

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

This structure will pool together the risk of multiple borrowers and add a layer of partial first loss credit enhancement from a highly rated guarantor.

For the first transaction under the programme, Nabard and Vivriti have partnered with Ujjivan Small Finance Bank, the release said.

Since the beginning of the pandemic, Nabard has rolled out special liquidity lines and has disbursed around Rs 2,000 crore to MFIs and non banking financial companies (NBFCs).


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