Context: The National Credit Guarantee Trustee Company (NCGTC) has initiated a forensic audit at Bandhan Bank over allegations of evergreening of loans and fictitious loan accounts.
What is Evergreening of Loans?
- It means throwing new loans to help a stressed or delinquent borrower repay old loans.
About National Credit Guarantee Trustee Company (NCGTC)
- Incorporated under the Companies Act, 1956.
- Established by the Department of Financial Services, Ministry of Finance, as a wholly owned company of the Government of India.
Functions of NCGTC
- Acts as a common trustee company for multiple credit guarantee funds.
- Credit guarantee programmes are designed to share the lending risk of the lenders and in turn, facilitate access to finance for the prospective borrowers.
- The common architecture of NCGTC has been designed to handle multiple guarantee programmes under a single umbrella organisation as part of a larger financial inclusion programme of the government.
Presently, there are eleven dedicated credit guarantee Trusts under the Management of NCGTC:
- Credit Guarantee Fund Scheme for Educational Loans (CGFEL)
- Credit Guarantee Fund Scheme for Skill Development (CGFSD)
- Credit Guarantee Fund Scheme for Factoring (CGFF)
- Credit Guarantee Fund for Micro Units (CGFMU)
- Credit Guarantee Fund for Stand Up India (CGFSI)
- Emergency Credit Line Guarantee Scheme (ECLGS)
- Credit Guarantee Scheme for MFIs (CGSMFI)
- Loan Guarantee Scheme for COVID Affected Sectors (LGSCAS)
- Loan Guarantee Scheme for COVID Affected Tourism Service Sector (LGSCATSS)
- Credit Guarantee Scheme for Startups (CGSS)
- Guarantee Scheme for Corporate Debt (GSCD).
Cumulatively, these Trusts have a committed credit guarantee corpus of ₹ 87,513 crore as on December 31, 2022.
Credit Guarantee Fund for Micro Units (CGFMU)
- To enable collateral free micro loans up to Rs.10 lakh and overdraft facility up to Rs.10,000 under Pradhan Mantri MUDRA Yojana and collateral free loans above Rs.10 lakh and up to Rs.20 lakh to Self Help Groups with the overall objective of financial inclusion.
- Who can lend: Banks/ NBFCs/ MFIs/ Other Financial Intermediaries conforming to certain eligibility criteria.
- Who can borrow: New or existing micro unit / enterprise falling under any sector covered under Pradhan Mantri Mudra Yojana (PMMY) or as defined in the MSMED Act, 2006 and Self Help Groups (SHGs).
Emergency Credit Line Guarantee Scheme (ECLGS)
- To enable 100% guaranteed collateral free loans to eligible businesses (including MSMEs) with a view to enable them to tide over the temporary liquidity crunch faced by them due to partial/complete lockdowns and other restrictions in the wake of Covid-19.
- Guarantee coverage: 100% of the amount in default.