Govt approves 'Stand Up India' scheme, credit guarantee fund for Mudra loans

07 Jan 2016 Evaluate

In order to boost entrepreneurship, Cabinet has approved 'Stand Up India' scheme to promote entrepreneurship among scheduled caste, scheduled tribes and Women entrepreneurs. The Stand up India Scheme will be a refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount of Rs 10,000 crore. Under the scheme, Rs 10 lakh to Rs 1 crore will be provided as loan for greenfield enterprises in the non-farm sector set up by SC, ST and women borrowers. The Scheme is intended to facilitate at least two such projects per bank branch, on an average one for each category of entrepreneur. The corpus of credit guarantee fund for Stand up India will be Rs 5,000 crore. The government aims to achieve the target of at least 2.5 lakh approvals in three years from the launch of the scheme.

Further, the scheme will be a handholding support for borrowers both at the pre-loan stage and during operations. This would include increasing their familiarity with factoring services, registration with online platforms and e-market places as well as sessions on best practices and problem solving. Under the scheme, the margin money of the composite loan would be up to 25 per cent, while remaining would be funded by the bank. The loan under the scheme would be appropriately secured and backed by a credit guarantee through a credit guarantee scheme for which Department of Financial Services would be the settler and National Credit Guarantee Trustee Company (NCGTC) would be the operating agency. Meanwhile, Cabinet also approved the creation of a Credit Guarantee Fund for Micro Units Development Refinance Agency (MUDRA) loans and conversion of MUDRA Ltd. ,a non banking financial company into MUDRA Small Industries Development Bank of India (SIDBI) Bank as a wholly owned subsidiary of SIDBI. The corpus of credit guarantee fund for MUDRA will be Rs 3,000 crore.

The credit guarantee fund for MUDRA is expected to guarantee more than Rs 1 lakh crore worth of loans to micro and small units in the first instance. It will help in reducing risk taken by banks and financial institutions in case of default under the scheme. The government will provide guarantee on portfolio basis to maximum extent of 50 per cent of the amount in default in portfolio.

The 'Start up India Stand up India' initiative was announced by the Prime Minister in his address to the nation on 15th August, 2015. Finance minister Arun Jaitley said these schemes will improve funding to micro and small entrepreneurs and help boost economic activity.

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