NABARD plans to finance NBFCs and MFIs

Context: National Bank for Agriculture and Rural Development (NABARD) has introduced ‘Structured Finance and Partial Guarantee Programme to NBFC-MFIs,’ a dedicated debt and credit guarantee product, to ensure unhindered flow of credit to the last mile in COVID-19-affected rural areas.

Details:

• NABARD has recently signed agreements with Vivriti Capital and Ujjivan Small Finance Bank to roll out the initiative that will enhance access to sustainable finance for micro enterprises and low-income households.
• As per this programme, NABARD will provide partial guarantee on pooled loans extended to small and mid-sized MFIs.
• It will help facilitate ₹2,500 crores funding in the initial phase and is expected to be scaled up going forward. The program is expected to cover over 1 million households across 28 states and 650 districts.
• 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 get notched up and helps lenders meet priority sector goals.

National Bank for Agriculture and Rural Development:

• National Bank for Agriculture and Rural Development (NABARD) is an apex development finance institution in India.
• The bank has been entrusted with "matters concerning policy, planning, and operations in the field of credit for agriculture and other economic activities in rural areas in India".
• NABARD is active in developing Financial Inclusion policy.
• Headquarters- Mumbai.

Reference: https://www.thehindu.com/business/nabard-planto-finance-nbfcs-mfis/article32432146.ece