Module: General Practice
Q76: Consider the following statements:
Assertion (A): Banks cannot insist on collateral security for loans sanctioned under the Pradhan Mantri Mudra Yojana (PMMY) up to ₹10 Lakh.
Reason (R): All eligible MUDRA loans are covered under the Credit Guarantee Fund for Micro Units (CGFMU), which reimburses the bank in case of default.
Reason (R): All eligible MUDRA loans are covered under the Credit Guarantee Fund for Micro Units (CGFMU), which reimburses the bank in case of default.
✅ Correct Answer: A
🎯 Quick Answer:
Both are true, and R explains A.Structural Breakdown: 1. The Rule: RBI guidelines mandate that no collateral is required for MSME loans up to ₹10 Lakh.
2. The Enabler: Banks are comfortable taking this risk because the CGFMU (managed by NCGTC) acts as the silent guarantor.
3. Causal Link: Without the CGFMU guarantee mechanism (R), banks would not be able to offer collateral-free loans (A) to high-risk micro borrowers.