Pooled Finance Development Fund Scheme (PFDF) #educratsweb

Pooled Finance Development Fund Scheme (PFDF)

Posted By educratsweb.comGovernment Schemes 🗓 Friday October 26 2018 👁 391

Pooled Finance Development Fund Scheme (PFDF)

The Pooled Finance Development Fund Scheme (PFDF) has been set up by the Central Government of India. The main aim of the Government authorities is to provide credit enhancement facilities to Urban Local Bodies (ULBs) based on their credit worthiness. This will enable them to access market borrowings through state-level pooled mechanism. PFDF is to ensure availability of resources to Urban Local Bodies in order to improve urban infrastructure and ultimately attain the goal of self-sustainability.

The growth rates in India that are reflected each financial year are largely driven by the growth in the urban areas and cities. The rural sector in India has limited potential, being majorly dependent on agriculture. Also, the continuous decline observed in the national poverty levels are being determined largely on the basis of urban cities. The Urban Local Bodies are responsible for undertaking majority of the urban infrastructure development projects. They are largely dependent on the funds provided by either the state governments or the local agencies. The poor administration in these local bodies pose a hurdle in financing such projects. They are unable to raise resources from the market/financial institutions for investment in infrastructural projects. In spite of the existing programmes of both the central and the state governments was a continuous gap between the availability and extent of requirements of funds for such projects, more commonly found in small and medium-sized cities. The Government thus, realized the need to provide direct access to capital markets for such cities. In order to make the local bodies self-sufficient and to ensure availability of resources at all times, the Government introduced the Pooled Finance Development Fund Scheme.

Objectives of PFDF

Decentralization of economic growth and power.
Improving infrastructural facilities and creating durable public assets in cities.
Promoting resource generated schemes for Urban Local Bodies to improve overall financial scenario.

The State Level Pooled Finance Mechanism

For implementing the Pooled Finance Development Scheme (PFDF), a state pooled finance entity (SPFE) needs to be established in every state. The SPFE could be a Trust, Special purpose entity, provided that the entity is just a pass through vehicle. The SPFE are expected to exhibit higher degrees of efficiency as compared to Urban local bodies since they will be able to generate goodwill in the bond markets and help the ULB to take advantage of scaled-up operations. With mutual co-operation, the SPFE will also hedge risks against the larger spectrum of activities of the Urban Local Bodies. The Central Government would be responsible for the funding of these State pooled finance entities through the PFDF. The Central Government makes funds available for the PFDF each year. 5 percent of this fund is utilized for project development assistance while, the remaining 95 percent would be utilized for the contribution to the Credit Rating Enhancement Fund (CREF) to improve the credit rating of the municipal bonds to investment grade. The cost of each project of the Municipality/ULBs will be estimated. 75 percent of these costs will be reimbursed by the Central Government and 25 percent by the state governments. The contribution by the Central Government will be one time in nature. It will comprise 10 percent of the proposed amount of bond issue or 50 percent of the CREF requirement as determined by a credit rating agency, whichever is less. In the event of default of the CREF, the Central Government will not be held responsible and the denouncement will be on the credit rating agency guaranteeing the ULB. At the maturity of the bonds issued, the share of the Center and state in the CREF will rest with the state entities for further leveraging of funds for infrastructure investment in Municipalities. The SPFE will be responsible for the management of accounts of the CREF and it shall not merge it with the accounts of other activities it undertakes. The funds in the CREF will be invested in bonds/notes of Government of India or bonds/accounts of other financial institutions rated by credit agencies as AAA(highest category). The bonds issued under the pooled finance scheme will have tax-free status under the Ministry's Guidelines for tax-free municipal bonds. However, the interest and dividend income earned from the CREF corpus will not be exempt from the levy of Income Tax. In order to provide exemption for the interest on bonds issued by the SPFE the Central Government by notification in the official gazette section 10(15)(vii) of the Income Tax Act has been suitably amended under Finance Act, 2007 enacted on 11 May 2007. Also, the State Pooled Financial Entity (SPFE) has been defined therein to mean such entity which is set up in the accordance with the guidelines of the Pooled Finance Development Scheme notified by the Central Government in the Ministry of Urban Development.
Guidelines for SPFEs

Facilitate Urban Local Bodies to access capital and financial market for investment in essential municipal infrastructure.
Reduce the cost of borrowing to local bodies with appropriate credit enhancement measures and through restructuring of existing costly debts.
Facilitate development of Municipal Bond market.
Facilitate the development of bankable urban infrastructural projects.
Responsibilities of SPFEs
Work in close collaboration and co-operation with the Municipalities/Urban Local bodies in urban infrastructural development projects.
Select projects based on viability and priority.
Get appraisal for the projects by recognized credit rating agencies i order to attract larger investment.
Mobilise resources by means of issuing bonds and redirecting funds for investment in projects.
Purchase bonds of ULBs or provide sub-loans to them.
Set up and manage Credit Rating Enhancement Fund (CREF).
Sign appropriate agreements with the Central Government and ULBs/Municipality.
Prepare projects that are technically and financially stable and in tune with environmental norms.

Contents shared By educratsweb.com
if you have any information regarding Job, Study Material or any other information related to career. you can Post your article on our website. Click here to Register & Share your contents.
For Advertisment or any query email us at bharatpages.in@gmail.com

RELATED POST
  1. Ayushman Bharat is National Health Protection Scheme
  2. Pradhan Mantri Rojgar Protsahan Yojana(PMRPY)
  3. Pradhan Mantri Shram Yogi Mandhan
  4. Dairy Entrepreneurship Development Scheme
  5. Sukanya Samridhi Yojana (Girl Child Prosperity Scheme)
  6. ग्रामीण डाक सेवक (GDS) कैसे बने ?
  7. National Service Scheme (NSS)
  8. Atal Bimit Vyakti Kalyan Yojana
  9. Rashtriya Swasthya Bima Yojana
  10. Crop Insurance
  11. Pradhan Mantri Krishi Sinchayee Yojana
  12. Invest 1.5Lakh/yr in PPF Scheme and get 46 lakh. Save Tax too!
  13. Kasturba Gandhi Balika Vidyalaya (KGBV)
  14. Unique Disability ID
  15. Pradhan Mantri Ujjwala Yojana
  16. Deen Dayal Upadhyaya Grameen Kaushalya Yojana [DDU-GKY] Scheme
  17. How the India Post Payments Bank Differs from Post Office Savings Account
  18. Check your Eligibility for Ayushman Bharat Medicare Health Yojana – Pradhan Mantri Jan Arogya Abhiyaan – Ayushman Bharat Yojana
  19. RNTCP - Government TB Treatment Education & Care NSP
  20. National Scheme of Welfare of Fishermen
  21. Development of Education in British India - To The Point
  22. Career Info | RGNIYD | Rajiv Gandhi National Institute of Youth Development
  23. Rajiv Gandhi National Institute of Youth Development | Manorama News
  24. Top 18 Latest Government Schemes Yojana Explained in Hindi- Current Affairs 2018 for UPSC
  25. 100 expected MCQs from Latest Government Schemes Set 1- Current affairs 2018 UPSC/SSC/PCS/IBPS/CDS
  26. New rules of Post Office Monthly Income Scheme (M.I.S.)2018 in Hindi

  27. What is Ayushman Bharat Scheme, Eligibility, benefit Launch and earn 15000 Rs monthly,
  28. post office savings scheme 2018 Hindi ! PPF(Public Provident Fund) Scheme !
  29. Sukanya Samriddhi Scheme CALCULATOR: How to calculate? Whats the benefit of Sukanya Yojna.
  30. कैसे बने BDO ऑफिसर Block Development Officer Career Opportunities
Submit   Job information   Contents   Link   Youtube Video   Photo   Create Practice Set   Add Questions in Practice Set   Affiliated Link   Check Score Sheet
Save this page as PDF | Recommend to your Friends