NHB
“CREDIT GUARANTEE FUND TRUST FOR LOW
INCOME HOUSING (CGFTLIH)”
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CGFTLIH
NHB
The Budget Proposal – Financial Year 2011-12
Hon’ble Finance Minister in his Budget speech for the FY
2011-12 has proposed to create a Mortgage Risk
Guarantee Fund under Rajiv Awas Yojana (RAY) to
enable provision of credit to Economically Weaker
Sections (EWS) and LIG households.
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CGFTLIH....contd.
NHB
Credit Guarantee Scheme for Low Income Housing
MoHUPA, GoI in consultation with DFS, MOF and NHB has
formulated the Credit Guarantee 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
collaterals/third party guarantee.
credit
without
 To strengthen credit delivery system and facilitate flow of
credit to low income housing.
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CGFTLIH .... Contd.
NHB
Setting Up of Trust
The Government of India will set up the Fund Trust under the Credit
Guarantee Scheme by execution of the Trust Deed either through
MoHUPA and /or specifically authorising NHB to set up such Fund Trust
Settlors of the Trust
Ministry of Housing & Urban Poverty Alleviation, Government of India
will be the settlors of the Trust.
Fund of the Trust
As per the draft proposal, the initial corpus fund of the Trust is
expected to 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.
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Proposed Features of CGFTLIH
NHB
1. Objectives
• To provide default guarantee for 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.
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Features of CGFTLIH ... Contd.
NHB
2. Eligible Housing Loans:
Housing loans for construction/ acquisition/purchase of new/old
Home/Flat involving an amount not exceeding Rs. 5 lakhs per loan
with housing unit of size upto 430 sqft (40 sqm) carpet area.
3.Eligible Lending Institutions:
Scheduled commercial banks, Regional Rural Banks, Urban Cooperative Banks as specified by the Trust, Housing Finance
Institutions registered with NHB or any other institution as directed
by GoI
4. 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. 6
Features of CGFTLIH ... Contd.
NHB
5. Guarantee Fee
One-time guarantee fee at specified rate of 2.00% of the total loan
amount shall be paid upfront by lending institutions to the Trust for
Availing the guarantee cover. However, the lending institution can
collect a premium of 0.25% for loans above Rs.2 lakhs and upto
Rs.5 lakhs from the borrowers to recover part of guarantee fees
paid to the Trust.
6. Extent of Guarantee:
Category
Maximum extent of Guarantee where Housing Loan is
Upto Rs. 2 lakhs or such
amount as decided by the
Trust from time to time
Housing loans by
Individual borrowers
Above Rs. 2 lakhs & upto Rs.
5 lakhs or such amount as
decided by the Trust from time
to time
90% of the amount in default 85% of the amount in default
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Features of CGFTLIH ... Contd.
NHB
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.
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Benefits of CGFTLIH
NHB
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.
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NHB’s Role
NHB
Pre-incorporation stage
Setting up of Trust Office
NHB will set up Trust Office/Cell and will manage the Fund &
implement the Scheme.
Infrastructure
NHB will provide the necessary infrastructure like Staff, IT support,
& other related support to the Trust.
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NHB’s Role ... Contd.
NHB
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.
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NHB
Thank You
Visit us at : www.nhb.org.in
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