Key facts
- Banks have received aggregate loan demand of Rs 10,000-12,500 crore under the credit guarantee scheme for MFIs.
- The credit guarantee provides 70-80% default coverage.
- Rigid caps on bank lending rates and strict margin rules for MFIs have made the scheme a non-starter for loan disbursement.
Banks have received an aggregate loan demand of Rs 10,000-12,500 crore under the credit guarantee scheme designed for Microfinance Institutions (MFIs). Despite the scheme offering 70-80% default coverage, its implementation has been hampered. Sources familiar with the matter indicate that rigid caps on bank lending rates and strict margin rules imposed on microfinance companies have made the scheme largely ineffective in terms of actual loan disbursement so far.