Credit Enhancement Fund

In News:

The government plans to set up a Credit Enhancement fund to support infrastructure projects that are rated below ‘AA’.

In Brief:

  • The Credit Enhancement fund will enable lower rated projects to raise loans at better rates while improving their viability.
  • Since institutional investors put in money only in top-rated infrastructure projects, augmenting ratings of projects that are otherwise viable, but do not have early cash flows, would help in attracting investors.
  • The Credit Enhancement fund can be jointly run and managed by the government and private sector sector companies just on the lines of the National Investment and Infrastructure Fund.
  • Most of the infrastructure projects are rated below ‘AA’; it means large institutions do not fund such projects. Through credit enhancement, a borrower or a bond issuer tries to improve its credit worthiness, which helps in lowering interest outgo.
  • The fund provides partial guarantee against loan losses to the lenders, enabling the borrower to enhance its credit ratings.

What is Credit Enhancement Fund:

  • CEF will provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and insurance funds.
  • A business that engages in credit enhancement is providing reassurance to a lender that it will honor its obligation. This can be achieved in various ways:
    – By providing additional collateral
    – By obtaining insurance guaranteeing payment
    – By arranging for a third-party guarantee
  • The company might also increase its cash reserves or take other internal measures to demonstrate its ability to pay its debts.
  • Credit enhancement reduces the credit risk/default risk of the company’s debt and makes it eligible for a lower interest rate.

Arrested Landing Of LCA Tejas

In news:

The Light Combat Aircraft (LCA), Tejas successfully landed on INS Vikramaditya and became the first indigenous aircraft to make an arrested landing on a naval ship.

In brief:

  • India enters a select group of nations in the world to develop aircrafts that are capable of landing and taking off from an aircraft carrier deck thatis barely 200 metres wide.
  • The elite countries that hold this capability includes US, China, UK, Russia and France.
  • The regular LCA needs a 1 km of run way to make its landing and this naval variant is capable to make its landing in a far less landing space, 100 metres and take off space of 200 metres.

About LCA Tejas:

  • It is the smallest lightweight, multi-role, single-enginesupersonic tactical fighter aircraft in the world and is being developed in single-seat fighter and twin seat trainer variants for the Indian Air Force and Indian Navy.
  • It has quadruplex digital fly-by-wire Flight Control System (FCS) with
    associated advanced flight control laws.
  • The aircraft with delta wing is designed for ‘air combat’ and ‘offensive air support’ with ‘reconnaissance’ and ‘anti-ship’ as its secondary roles.
  • Extensive use of advanced composites in the airframe gives a high strength to weight ratio, long fatigue life and low radar signatures.
  • It is designed to carry a variety of air-to-air, air-to- surface, precision guided and standoff weaponry.
  • It is jointly developed by Aeronautical Development Agency and Hindustan Aeronautics Limited.

The LCA programme was launched in the early 1980’s for two primary purposes.

  • The principal and most obvious goal was the development of a replacement aircraft for India’s ageing MiG-21 fighters.
  • The other main objective was to give an impetus for an across-the-board advancement of India’s domestic aviation capability.
+91

captcha
Admission Enquiry
Top