The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval to establish a Credit Guarantee Fund for Factoring for MSME units.

The corpus of the Fund is Rs.500 crore. Assuming a leverage of 5 times of the corpus, gross factoring transactions would cover Rs.20,000 crore per annum at the end of fifth year. The corpus is estimated to be Rs.492 crore at the end of fifth year. In third year of operations, a mid-term review of the Fund may be undertaken and propose modifications if any.

The goal is to promote "factoring without recourse". The mechanism would be:

i. Governing structure - DoFS will be "the Settlor" and shall establish a Fund for guaranteeing factored debts. The Fund shall be under "National Credit Guarantee Trustee Company (NCGTC). It will have a Management Committee consisting of Secretary, DFS as the ex-officio Chairman. The convenor of the Management Committee will be nominated by the Settlor. The Management Committee shall be responsible for all policy aspects of the Fund.

ii. Coverage - Credit guarantee cover for a maximum of 50 percent of factored debt will be provided under the Fund. To start with, only transactions covered under the Factoring Regulation Act, 2011 are to be included.

iii. Guarantee Fee - The guarantee fee chargeable from the MLIs shall not exceed 0.75 percent per quarter of the guaranteed factored debts for the amount of guarantee cover.

iv. Filing of claims by factors - Claims shall be filed by MLIs with the proposed Fund, as per guidelines prescribed by the Management Committee.

v. Interest rate - The actual interest rate to be charged from the MSMEs will be left to Factors.

vi. Modifications to the parameters under the scheme - The key elements of the structure have been proposed based on very preliminary data in the sector. These may require to be revisited and will be done with the approval of FM.

Factoring is a financing arrangement for suppliers by making pre¬payments against invoices. This provides liquidity to MSMEs and facilitates collection of receivables. India`s factoring volume is below Rs.20,000 crore. The Factoring Regulation Act, 2012 provides the legal framework for factoring. RBI has issued guidelines. However, there is no insurance for factoring.

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Prime Minister participates in the first Outreach Session of G7 Summit
June 12, 2021

Prime Minister Shri Narendra Modi participated in the first Outreach Session of the G7 Summit today.  

The session, titled ‘Building Back Stronger - Health’, focused on global recovery from the coronavirus pandemic and on strengthening resilience against future pandemics. 

During the session, Prime Minister expressed appreciation for the support extended by the G7 and other guest countries during the recent wave of COVID infections in India. 

He highlighted India's ‘whole of society’ approach to fight the pandemic, synergising the efforts of all levels of the government, industry and civil society.   

He also explained India’s successful use of open source digital tools for contact tracing and vaccine management, and conveyed India's willingness to share its experience and expertise with other developing countries.

Prime Minister committed India's support for collective endeavours to improve global health governance. He sought the G7's support for the proposal moved at the WTO by India and South Africa, for a TRIPS waiver on COVID related technologies. 

Prime Minister Modi said that today's meeting should send out a message of "One Earth One Health" for the whole world. Calling for global unity, leadership, and solidarity to prevent future pandemics, Prime Minister emphasized the special responsibility of democratic and transparent societies in this regard. 

PM will participate in the final day of the G7 Summit tomorrow and will speak in two Sessions.