IIFCL Will Be Government Aide For Credit Enhancement Guarantee Funds
Post on 20,August 2017   5:00 AM
By - PolyEyes Staff
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Government has chosen India Infrastructure Finance Co. Ltd (IIFCL) as the lead promoter of a credit enhancement guarantee fund, announced in the 2016-17 Union budget

What is Credit Enhancement Guarantee Fund:  The union ministry for social justice and Empowerment on May 6, 2015 launched the Credit Enhancement Guarantee Scheme for Scheduled Castes. Government has picked India Infrastructure Finance Co. Ltd (IIFCL) as the main marketer of a credit enhancement guarantee fund, announced in the 2016-17 budget. 

Capital of Rs. 1,500 Crores & will be able to provide assurance for up to Rs. 40,000 Crores worth of infrastructure projects. 

It offers a supplementary source of assurance that the borrower will repay the loan and help in borrowers raise loans at reduced interest rates. 

Need of the proposal: India is in the need of about $1 trillion investment in the next 10 years for infrastructure, to have a sustainable development and growth.

Significance of the proposal

  • It would strengthen in by enhancing the value of bond market in India.
  • It will attract long-term investments especially related to global insurance, pension and sovereign wealth funds.
  • It will help enhance the credit rating of bonds issued by infrastructure firms.
  • Credit enhancement measures can help reduce interest rate costs by almost two per cent.

Concluding Remark:Though it is a scheme benefitting a large section of deprived section of society as it will be providing scheme for young and start-up entrepreneurs belonging to Scheduled Castes to avail financial assistance. This allocation was made under Social Sector Initiatives to promote entrepreneurship among SC’s. Nevertheless it is a long term initiative and such large infrastructure projects are bound by longer developmental phase and slower growths, consecutively returns are slow relatively. With India being the fastest growing economy in the world, it would need such funding initiatives to sustain this growth. Credit guarantee fund is a welcome step. It would also depend on the diplomatic efforts by India to attract sovereign wealth and pension funds of different countries.

 


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