NCGTC: The Secret Ingredient to Lenders in India.

National Credit Guarantee Trustee Company Ltd (NCGTC) was set up by the Department of Financial Services, Ministry of Finance, Government of India on 28.03.2014 to, inter alia, to act as a common trustee company to manage and operate various credit guarantee trust funds.

NCGTC carries on the following activities,

Administration: NCGTC sets up and maintains the rules, guidelines, and processes that define how the credit guarantee schemes function. This includes defining eligibility criteria, loan limits, and the structure of the guarantees.

Risk Management: NCGTC assesses and monitors the financial risks involved in offering guarantees to lenders. If a borrower defaults on their loan, NCGTC steps in to cover the losses as per the terms of the guarantee, protecting the lender.

Facilitation: It acts as a bridge between banks/lenders and borrowers, encouraging lenders to extend credit to sectors that are often considered higher risk (e.g., MSMEs) by reducing their financial exposure through guarantees.

Monitoring: NCGTC continuously monitors the performance of these schemes, making adjustments and improvements as needed to ensure they are effective in meeting their goals of increasing credit flow to targeted sectors.

1.       Credit Guarantee Fund for Skill Development (CGFSD)

2.       (CGFSD), Credit Guarantee Fund for Educational Loans (CGFEL)

3.       Credit Guarantee Fund for Factoring (CGFF),

4.       Credit Guarantee Fund for Micro Units (CGFMU),

5.       Credit Guarantee Fund for Stand-up India Loans (CGSSI),

6.       Emergency Credit Line Guarantee Scheme (ECLGS),

7.       Loan Guarantee Scheme for COVID Affected Sectors (LGSCAS),

8.       Credit Guarantee Scheme for MFIs (CGSMFI)

9.       Loan Guarantee Scheme for the Covid affected Tourism Service Sector

(LGSCATSS)

10.   Guarantee Scheme for Corporate Debt (GSCD)

11.   Credit Guarantee Scheme for Start-ups (CGSS)

NCGTC has committed corpus of Rs.89,412.50 crore as on 31.03.2023. In the event of claim from lenders, NCGTC pays 75% of the guaranteed amount to lenders within 30 days of an eligible claim being invoked, with the remaining 25% paid once recovery proceedings are concluded or the decree becomes time-barred​. There are checks and balances and one of the banks was audited to check for correctness of claim by the auditors appointed by NCGTC

NCGTC earned a total income of Rs.20.81 crores and PAT of Rs.9.99 crores as on 31.03.2023. Even though NCGTC is more  connected to lending institutions, they have also devised a grievance redressal mechanism where the borrower can bring to the notice of their grievance to NCGTC.

It will be interesting to see how NCGTC adds more of guarantees to various sectors and how the claims move in the coming years. Overall, the establishment of NCGTC is the need for country like us.