The State Pooled Finance Entities
The pool finance development scheme came into the picture, and soon a body was needed to regulate whether the project was taking place in an efficient and nonbiased manner. Thus the state pool finance entity SPFE was established in all the states. It was decided that around 5% of the funds would be used for project development, and the remaining, about 95%, should be used as a credit rating enhancement fund, also known as CREF. This would lead to the improvisation of municipal bonds. Although it was stated that the central government would make the 10% contribution to these points and 50% of the CRF will also be made by it. SPFE, which we discussed earlier, would keep a check on the accounts of CREF. It would also be taken care of that the bonds in this scheme would be tax-free.
Pooled Finance Development Fund Scheme
The Pooled Finance Development Fund (PFDF) scheme was started to initiate the facility of providing credit enhancement to the urban local bodies. The PFDF scheme gained popularity after it came into force in the year 2006. The scheme was first approved by the central government before it came into action. The main agenda of this scheme was to access the market borrowings for all the urban local bodies and then provide them with a qualified credit limit that was available based on their profile. This process was to be made available through the state-level Pool finance mechanism.
Since the mechanism was to be implemented at the state level, therefore, the name state-level pool finance mechanism was derived from the entire process of the PFDF scheme. The PFDF scheme had the following goals in mind.
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