The ministry of finance has increased the overage of lender’s los

| The ministry of finance has increased the overage of lender’s loss in case of loan default under the Credit Guarantee Fund for Micro Units (CGFMU) scheme to _________ from earlier 50%.

A. 60 per cent

B. 65 per cent

C. 70 per cent

D. 75 per cent

E. 85 per cent

Please scroll down to see the correct answer and solution guide.

Right Answer is: D

SOLUTION

● According to the amendment of Credit Guarantee Fund for Micro Units (CGFMU) scheme as notified by the ministry of Finance states that the coverage of lender’s loss in case of loan default is increased to 75% from earlier 50%.

● The aim of the amendment is to incentivise lending to micro businesses which bear the impact of coronavirus outbreak & the lockdown.

● Lenders can pay a fee for the portfolio of loans they want to cover under the guarantee, which enables them to lend easily while improving profitability

● The lender’s burden under the scheme has reduced from the first 5% of the amount in default to 3%.