PMAY scheme falls short of covering risk of death
Repayment of loan under the scheme must be protected by an insurer
image for illustrative purpose
Experts have raised a demand for relaunch of Pradhan Mantri Awas Yojana (PMAY) with inbuilt credit-linked insurance cover. The idea is to inherit a home-not a loan. A representation has been made by the industry body CII in this connection before IRDAI, Finance Ministry and NHB
The PMAY is the ambitious mission of the government, aimed at 'Housing for All' as India completes 75 years of Independence by the year 2022. The journey which began in 2015 to ensure that 2 crores houses are built across the nation for citizens belonging to the lower income group, economically weaker section and middle-income groups through interest loan subsidy to first-time home borrowers. So far, total sum amounting to Rs 1.06 lakh crore has been released by the government and 83.97 lakh houses have been grounded under the scheme.
The scheme, however, falls short of covering the risk of death or disability of the borrower as the loans sanctioned under the scheme do not have an in-built insurance provision.
Talking to Bizz Buzz, RV Verma, former CMD of NHB, said, "It is a good proposal which will act both as a social protection measure for the borrowers as well as risk mitigation measure for the lenders in the event of unavoidable circumstances, leading to the death of the borrower. The repayment will be protected by the insurer. This will further lead to interest rate coming down because this is another risk area which will be covered for the lender. I mean, this will help further reduce the risk for lender and a part of the benefit can be passed on by the lender to the borrower in the process. The premium on the insurance cover may be provided through government subsidy support. Thus, it will become a credit-link subsidy scheme plus insurance cover. The additional expenditure in the form of insurance premium should be borne by the government, keeping in view the segment of the population and the objective of the PMAY."
With this insurance cover, the default risk will come down which should translate in some reduction in the interest on the lending rate too, he said.
The scheme could have standard premium rates which could be utilized by any insurer to offer the credit cover with their partner banks. The in-built level cover equal to the loan amount could be taken at by the borrower at the inception.
