New NBFC to provide gap funding

The new non-banking finance company (NBFC), proposed by the Andhra Pradesh government to extend credit facility to the Indira Kranthi Patham (IKP) group, will only resort to gap funding and will not be an alternate to the self-help group SHG) bank linkage system.

Chief minister N Kiran Kumar Reddy, in a recent letter to the Union finance minister Pranab Mukherjee, requested the latter to convey the Centre's concurrence for equity contribution of Rs 100 crore from the SHG development.

The NBFC will operate by providing credit limits to each Mandal Samakhya (MS) depending on their corpus and functional structure. In turn, each MS will give similar credit limits to the village organisation of SHGs after due assessment of their performance.

The NBFC will operate on strict efficiency parameters to deliver credit to the SHG members at interest rates below 15 per cent, according to a press release on Sunday.