Credit guarantee fund- A new initiative to help home loan customers
The good thing is that NaMo government manifesto and actions are well co-ordinated. They had promised ‘’housing for all by 2020’’ and now they are looking to set up a credit guarantee fund that will help bring down interest on home loans for small borrowings, a move aimed at giving a big push to low-cost housing.
The finance ministry is discussing with RBI the details and norms of the fund that will be set up under the ambit of the Deposit Insurance and Credit Guarantee Corporation (DICGC). The finance ministry official mentioned that since the housing loans will be backed by collateral and the fund, interest rates for such loans will come down.
A credit guarantee fund will insure up to 75 % of the housing loan sanctioned by the lending institution under the existing DICGC scheme however the new government wants to amend the DICGC Act to make borrowing easy for the lower strata of the society and the rest of the population which wants a loan for financing their property.
All the banks currently pay a mandatory deposit insurance premium to DICGC. The new scheme is likely to be targeted at home loan borrowers in categories other than economically weaker section or lower income group since there is already a separate scheme run by National Housing Bank to support such borrowers.
Source- The Economic Times
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