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“CREDIT RISK GUARANTEE FUND TRUST FOR LOW INCOME HOUSING (CRGFTLIH)”

The Credit Risk Guarantee Fund Scheme aims to provide credit guarantee support to low-income households for housing loans up to Rs. 5 lakhs without collateral. It strengthens the credit delivery system to facilitate easy access to housing loans. The fund, set up by the Government of India, supports affordable housing for economically weaker sections and facilitates securitization of guaranteed loans. Eligible loans include those for home improvement, construction, or acquisition of dwelling units. Lending institutions eligible to participate include banks, cooperative banks, and housing finance institutions. By availing this scheme, lenders benefit from transferred credit risk, capital relief, and mobilization of funds through securitization, while EWS/LIG households gain credit enhancement and increased access to loans. The fund's features outline the process for availing guarantees and the responsibilities of lending institutions to ensure the smooth flow of credit to low-income housing segments.

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“CREDIT RISK GUARANTEE FUND TRUST FOR LOW INCOME HOUSING (CRGFTLIH)”

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  1. “CREDIT RISK GUARANTEE FUND TRUST FOR LOW INCOME HOUSING (CRGFTLIH)” NEW DELHI APRIL 20, 2012

  2. CRGFTLIH The Budget Proposal • Hon’ble Finance Minister in his Budget speech for the FY 2011-12 had proposed to create a Mortgage Risk Guarantee Fund under Rajiv AwasYojana (RAY) to enable provision of credit to Economically Weaker Sections (EWS) and LIG households. • Further, Hon’ble Finance Minister in his Budget speech for the FY 2012-13 has announced to set up Credit Guarantee Trust Fund to ensure better flow of institutional credit for housing loans.

  3. CRGFTLIH....contd. Credit Risk Guarantee Fund Scheme for Low Income Housing MoHUPA, GoI in consultation with DFS, MOF and NHB has formulated the Credit Risk Guarantee Fund Scheme to provide credit guarantee support to Collateral free/third-party guarantee free individual housing loans upto Rs. 5 lakhs extended by banks and HFIs (registered with NHB) for Low Income Housing. Objective of Credit Guarantee Scheme • Default guarantee as Risk Mitigant • To enable availability of bank credit without collaterals/third party guarantee. • To strengthen credit delivery system and facilitate flow of credit to low income housing.

  4. CRGFTLIH .... Contd. Setting Up of Trust The Government of India will set up the Trust under the Credit Risk Guarantee Fund Scheme by execution of the Trust Deed either through MoHUPA and /or specifically authorising NHB to set up such Trust Settlors of the Trust Ministry of Housing & Urban Poverty Alleviation, Government of India will be the settlor of the Trust. Fundof the Trust The initial corpus fund of the Trust will be Rs.1000 crores to be contributed by GoI. State Governments may contribute in accordance with their slum population. Further contribution to the corpus will be decided by MoHUPA from time to time.

  5. Features of CRGFTLIH 1. Objectives • To provide default guarantee for affordable housing loans upto 5 lakhs sanctioned and disbursed by the lending institutions without any collateral security and/or third party guarantees to the new or existing 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.

  6. Features of CRGFTLIH ... Contd. 2. Eligible Housing Loans: Housing loans for home improvement/construction/ acquisition/purchase of new or second hand dwelling units involving an amount not exceeding Rs. 5 lakhs per person with housing unit of size upto 430 sqft (40 sqm) carpet area. 3. Eligible Lending Institutions: 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, Housing Finance Institutions registered with NHB or any other institution as directed by GoI • Agreement by the Lending Institution: Lending institution will have to enter into an agreement with the Trust in such form as may be required by the Trust to be entitled to a guarantee in respect of any eligible housing loan granted by it.

  7. Features of CRGFTLIH ... Contd. • Guarantee Fee One-time guarantee fee at specified rate of 1.00%(or as specified by Trust after taking approval from MoHUPA) of the total loan amount shall be paid upfront by lending institutions to the Trust for Availing the guarantee cover. The guarantee fee shall not be charged from the beneficiary as an upfront processing fee. However, banks may alter the interest rate to cover upto 50% of the guarantee fee. The premium charged should be clearly disclosed by the lending institutions.

  8. Features of CRGFTLIH ... Contd. • 6. Extent of Guarantee:

  9. Features of CGFTLIH ... Contd. 7. Invocation of Guarantee The conditionalities for invocation of guarantee stipulates invoking the guarantee in respect of housing loans within a maximum period of 1 year from the date of NPA and/or within the time frame as specified by the Trust etc. 8. Responsibilities of Lending Institutions The responsibilities of the lending institutions inter-alia, specifies use of prudent banking judgement, conduct of account, safeguarding by obtaining primary security, close monitoring of the account, due diligence and necessary actions for recovery of the account, ensuring collection of premium from the borrower to cover part of the guarantee fee payable to the Trust etc.

  10. Benefits of CGFTLIH 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.

  11. NHB’s Role Pre-incorporation stage Setting up of Trust Office NHB will set up Trust Office/Cell and will manage the Fund & implement the Scheme. Registration of Trust Deed & Incorporation of Trust MoHUPA has obtained the Cabinet Approval for the Scheme and Trust Deed as prepared in consultation with NHB. MoHUPA will execute the Trust Deed either itself/or specifically authorising NHB to do so. Infrastructure NHB will provide the necessary infrastructure like Staff, IT support, & other related support to the Trust.

  12. NHB’s Role ... Contd. Post- Incorporation Stage • Draft all legal and other documents required for functioning of the Trust e.g. registration by PLIs, lodging and settlement of claims. • Draft Investment Policy for the Trust. • To design the customised financial products, marketing of the Scheme and its effective implementation. • To build sound and healthy liasoning with eligible PLIs. • To organise seminars and conferences for addressing the related issues • To recommend to Board of Trustees the name of probable CEO for consideration • To depute required staff for management of the Trust. • To maintain separate accounts for the Fund Trust.

  13. Thank You Visit us at : www.nhb.org.in

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