Guarantees for MFI loans to kickstart lending in rural areas, say experts

Scheme extended to term loans from banks to MFIs for on-lending; tenure of loan extended to 36 months from 18 months earlier, with cap on interest rate charged by banks

The credit guarantees to facilitate micro loans are expected to improve liquidity for MFIs, especially the smaller ones, and kickstart lending from the second quarter after very low volumes in April-June period.

Alok Misra, chief executive and director, Microfinance Institution Network (MFIN) said this scheme will cover term loans from banks to MFIs, unlike only commercial paper and non-convertible debentures in last year’s scheme. It will facilitate flow of funds in these difficult times.

Guarantees will be provided to banks for loans to new or existing NBFC-MFIs or MFIs, for on lending up to Rs 1.25 lakh to approximately 2.5