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Credit Guarantee Enhancement Corporation in the pipeline

The government is set to establish Credit Guarantee Enhancement Corporation in order to augment sources of capital for infrastructure financing. Envisioning the same in her maiden budget speech on July 5, Finance Minister Nirmala Sitharaman had said, “We recognize that investment driven growth requires access to low-cost capital. It is estimated that India requires investments averaging Rs 20 lakh crore every year.”

The proposed entity is expected to free up lending space of up to Rs 3.5 lakh crore by banks to the infrastructure sector. The fund will provide guarantee to bonds issued by completed projects and enable firms to improve their credit ratings. The initial corpus for this fund is estimated at INR 20,000 crore. It is believed that INR 500 crore has already been sanctioned to get the fund started.