Credit Risk Guarantee Fund Scheme for Low Income Housing

Name of the scheme: Credit Risk Guarantee Fund Scheme

Purpose: The main purpose of this scheme is to enable availability of bank credit without collaterals/third party guarantee and to strengthen credit delivery system and facilitate flow of credit to low income housing viz., EWS/LIG*.

(EWS- Economically Weaker Sections and LIG Low Income Groups)

Objectives:

Broad objectives of this scheme are-

• To provide default guarantee for housing loans up to Rs. 5 lakh sanctioned and disbursed by the lending institutions in urban areas without any collateral security and/or third party guarantees to the new borrowers in the EWS/LIG categories.
• To undertake securitisation of the guaranteed loans and to do all other acts or things as may be necessary, either directly or otherwise, in such manner as may be decided by the Board of Trustees.
• To do such other acts and things as may be incidental to or consequential to the objectives.

Setting Up of Trust:

MoHUPA (Ministry of Housing and Urban Poverty Alleviation), GoI has set up and registered Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) on 1st May, 2012 by executing the Trust Deed. The CRGFS is effective from June 21^st 2012.

Settlors of the Trust:

MoHUPA, Government of India will act as the settlor of the Trust.

Corpus of the Trust:

• The Trust has been set up with an initial corpus of Rs.1 lakh. Further contributions will be made to the corpus by the Settlor and State Governments who draw on it, in accordance with their slum population, i.e. 1,000 crore in the aggregate by the settlor and Rs. 200 crore by State Governments.
• First tranche of the corpus amounting to Rs 50 crore has been received by the Trust as of date from the Government of India.

Benefits to Lenders

• Credit Risk transferred to the Trust.
• Capital Relief: Reduction in credit risk leads to reduction in risk weighted assets and hence lesser capital requirement for CRAR.

• Mobilization of Funds through Securitization

Benefits to EWS/LIG Households

• Credit enhancement EWS and LIG households will result in increased credit flow from lenders for this segment
• Increased availability and accessibility of institutional loan/credit.
• Affordable interest rates due to reduced risk & lesser capital requirements for lenders.

Eligible institutions:

Eligible lending institutions are-

• Scheduled commercial banks,
• Regional Rural Banks,
• Urban Co-operative Banks,
• NBFC-MFIs
• Apex Cooperative Housing Finance Societies registered under the State Co-operative Societies Act, eligible under RBI guidelines,
• Housing Finance Institutions registered with NHB
• or any other institution as directed by GoI

Eligible loan amount:

Maximum housing loan amount should not exceed Rs. 5 lakh per person.

Eligible activity covered under this scheme:

Home improvement, construction, acquisition, and purchase of new or second hand dwelling units involving a housing loan amount not exceeding 5 lakh per person.

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